The Wealth Effect of New Product Introductions on Industry Rivals

Sheng-Syan Chen, Kim Wai Ho and Kueh Hwa Ik
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Sheng-Syan Chen: National Taiwan University
Kim Wai Ho: Nanyang Technological University
Kueh Hwa Ik: Unza Group of Companies

The Journal of Business, 2005, vol. 78, issue 3, 969-996

Abstract: We find that, on average, rivals of firms announcing new products experience a significantly negative wealth effect. We also show that rivals in technologically based industries experience the most significantly unfavorable effect. Rivals' share price response is more unfavorable when the wealth effect on the announcers is larger and when frequent announcers introduce new products. Smaller rivals and those with better investment opportunities also are more adversely affected. Further, highly leveraged rivals, especially those in concentrated industries, experience a greater wealth loss. However, we find that rivals' wealth effects are more favorable when the products introduced are very new.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:78:y:2005:i:3:p:969-996

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