Measuring the Impact of Corporate Investment Announcements on Share Prices

29 Pages Posted: 10 Oct 2000

See all articles by Esther del Brío

Esther del Brío

University of Salamanca

Javier Perote

Universidad Rey Juan Carlos - Department Economia; University of Salamanca

Julio Pindado

University of Salamanca - Administration and Business Economics

Abstract

Previous studies on corporate investment impact on market prices have revealed that investors react positively to the publication of information regarding increases in capital expenditure. We test this hypothesis for the Spanish capital markets considering a sample composed of both investment and divestment announcements. Our results contradict the available evidence since no significant market reaction, either upward or downward, is detected once the information is publicly available. Moreover, the information of the announcement is impounded by prices five days before the announcement date. We also consider the valuation effects of corporate investment regarding the level of cash flow of the firm, finding significant differences in the market reaction.

Keywords: Corporate investment announcements, market response, Tobin's q, FCF, GARCH effects

JEL Classification: G14, G31.

Suggested Citation

del Brío González, Esther and Perote Peña, Javier and Pindado, Julio, Measuring the Impact of Corporate Investment Announcements on Share Prices. Available at SSRN: https://ssrn.com/abstract=234578 or http://dx.doi.org/10.2139/ssrn.234578

Esther Del Brío González (Contact Author)

University of Salamanca ( email )

Campus Miguel de Unamuno
37008 Salamanca, Salamanca 23007
Spain
34-923-294640 (Phone)
34-923-294715 (Fax)

Javier Perote Peña

Universidad Rey Juan Carlos - Department Economia ( email )

Mostoles - Madrid, E-28933
Spain

University of Salamanca ( email )

Campus Miguel de Unamuno
Economia e Historia Economica
37008 Salamanca
Spain
34-923-294640 (Phone)
34-923-294686 (Fax)

Julio Pindado

University of Salamanca - Administration and Business Economics ( email )

Campus Miguel de Unamuno
Salamanca, ES-37007
Spain
+34 923 294640 (Phone)
+34 923 294715 (Fax)

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