The effect of preannouncements and announcements on the value of the firm.
This thesis examines the impact of new product preannouncements and announcements on the value of the firm. There are three main findings. First, using the standard event study methodology, we find that the financial markets do not, on average, react significantly to new product preannouncements or announcements. Second, despite the previous result, firm-specific factors are relevant. Preannouncements which provide detailed information generate excess returns: in contrast, only announcements which provide information on multiple products increase the value of the firm. Although these effects are quantitatively large, the statistical results are only weakly significant. Third, there is no relationship between the firm's riskiness and firm-specific factors (e.g., firm size and SIC group) regardless of whether the firm conveys new product information using announcements or preannouncements. Finally, we theorize that optimal policy requires the firm to coordinate its marketing and financing decisions by linking its decisions to float new equity or debt with the timing of new product announcements and preannouncements. Future research should test this hypothesis.
Authors: | Koku, Paul Sergius. ; Newark. |
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Institutions: | Rutgers The State University of New Jersey |
Subject: | Business Administration | Marketing | Finance |
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