54 D.K.Spiess,J.Affleck-Graves Journal of Financial Economics 54 (1999)45-73 returns over long periods.While Loughran and Ritter(1996)dispute the bias found by Conrad and Kaul (1993),Barber and Lyon (1997)and Kothari and Warner(1997)present evidence that using cumulated abnormal returns over long periods does lead to biased statistical tests.Barber and Lyon (1997)also show,however,that the bias disappears if a single matched control firm is used. We therefore measure long-run post-offering performance by computing hold- ing-period returns for each debt-issuing firm and its matched control firm over a five-year period following the debt offering date.If the offering firm is delisted before the five-year anniversary of its debt sale,the holding-period returns of that firm and its matched firm are truncated on the same day. In Section 4,we demonstrate the robustness of our results using several alternative methods.There,we report results of long-run performance based on average monthly abnormal returns rather than buy-and-hold returns,based on three-factor regressions of calendar-time abnormal returns,and using alterna- tive benchmarks of buy-and-hold returns. 3.Post-offering performance Table 3 reports the distributions of post-offering holding-period returns for sample firms,matched firms,and the paired differences.We also provide statistical results for differences in the mean and in the median holding-period return.Because we are interested in the abnormal returns associated with a debt offering by the typical firm,we focus throughout the remainder of the paper on medians but we do report means when they lead to important differences in the conclusions drawn. 3.1.Post-offering performance of straight debt issuers For the straight debt issuers,the median five-year holding-period return is 43.8%,while the median holding-period return for their size-and-book-to- market-matched counterparts is 65.8%.The median difference in holding- period returns is -18.7%and is significant at the 0.01 level using the Wilcoxon signed-ranks test.In addition,the difference between the holding-period return of the sample and the matched firms is negative in 56%of the cases,and this fraction is statistically different from 50%using a simple sign test.The mean holding-period return of 83.1%is not,however,statistically different from the 97.4%mean return for the matched firms.Our median results suggest that,for the individual firm,issuing debt is likely to be followed by a period of relative underperformance.The mean result indicates that it may be difficult for inves- tors to earn abnormal profits by trading on this underperformance. Prior studies such as Dann and Mikkelson(1984),Eckbo (1986),and Mikkel- son and Partch (1986)find an insignificantly negative price reaction to thereturns over long periods. While Loughran and Ritter (1996) dispute the bias found by Conrad and Kaul (1993), Barber and Lyon (1997) and Kothari and Warner (1997) present evidence that using cumulated abnormal returns over long periods does lead to biased statistical tests. Barber and Lyon (1997) also show, however, that the bias disappears if a single matched control "rm is used. We therefore measure long-run post-o!ering performance by computing hold￾ing-period returns for each debt-issuing "rm and its matched control "rm over a "ve-year period following the debt o!ering date. If the o!ering "rm is delisted before the "ve-year anniversary of its debt sale, the holding-period returns of that "rm and its matched "rm are truncated on the same day. In Section 4, we demonstrate the robustness of our results using several alternative methods. There, we report results of long-run performance based on average monthly abnormal returns rather than buy-and-hold returns, based on three-factor regressions of calendar-time abnormal returns, and using alterna￾tive benchmarks of buy-and-hold returns. 3. Post-o4ering performance Table 3 reports the distributions of post-o!ering holding-period returns for sample "rms, matched "rms, and the paired di!erences. We also provide statistical results for di!erences in the mean and in the median holding-period return. Because we are interested in the abnormal returns associated with a debt o!ering by the typical "rm, we focus throughout the remainder of the paper on medians but we do report means when they lead to important di!erences in the conclusions drawn. 3.1. Post-owering performance of straight debt issuers For the straight debt issuers, the median "ve-year holding-period return is 43.8%, while the median holding-period return for their size-and-book-to￾market-matched counterparts is 65.8%. The median di!erence in holding￾period returns is !18.7% and is signi"cant at the 0.01 level using the Wilcoxon signed-ranks test. In addition, the di!erence between the holding-period return of the sample and the matched "rms is negative in 56% of the cases, and this fraction is statistically di!erent from 50% using a simple sign test. The mean holding-period return of 83.1% is not, however, statistically di!erent from the 97.4% mean return for the matched "rms. Our median results suggest that, for the individual "rm, issuing debt is likely to be followed by a period of relative underperformance. The mean result indicates that it may be di$cult for inves￾tors to earn abnormal pro"ts by trading on this underperformance. Prior studies such as Dann and Mikkelson (1984), Eckbo (1986), and Mikkel￾son and Partch (1986) "nd an insigni"cantly negative price reaction to the 54 D.K. Spiess, J. A{eck-Graves / Journal of Financial Economics 54 (1999) 45}73