Below is a simplified version of a model developed to investigate the impact of stock
splits on long-run stock performance for acquiring firms:
y = Bo+ Bıx1+B2x2 + B3x1x2
Where: y = average salary; x1 = {1, if stock split prior to acquisition, 0 if not } x2 = {1 if
firm's discretionary accrual is high, 0 if discretionary accrual is low.
A) In terms of the B's in the model, what is the mean buy-out-and-hold return rate (BAR)
for a firm with no stock split and a high discretionary accrual?
B) In terms of the B's in the model, what is the mean buy-out-and-hold return rate (BAR)
for a firm with no stock split and a low discretionary accrual?
C) For firms with no stock split, find the difference between the mean BAR for firms
with high and low DA. (Hint: Use your answers to parts a and b).
D) For firms with a stock split, find the difference between the mean BAR for firms with
high and low DA. (Hint: Use your answers to parts a and b)