The Impact of the Relaxation of Visits by Mainland China Tourists to Taiwan on Stock Returns and Financial Performance: The Case of Listed Tourism Industry Firms

The purpose of this study is to examine the impact on listed tourism industry firms of the relaxation of the policy to allow Mainland China tourists to visit Taiwan directly for sightseeing from a financial viewpoint. First, before the implementation of the policy, this study applied the "event study method" to investigate the effects on the stock prices of the announcement of the open policy. The results indicate that, except for the Aviation industry, the announcement has given rise to significantly abnormal returns to tourism industry stocks, but there has only been a short-term effect lasting one or two days. Moreover, following the implementation of the policy, the study uses the T-test and Wilcoxon test to examine the differences in financial performance on the listed tourism industry firms. The results show that it is only for the category of Hotel and Amusement firms, one of the operating efficiency indicators, that the "Sales per employee" variable has significantly increased. Other indicators of financial performance have almost all significantly decreased. This implies that the open policy does not substantially improve the financial performance of listed tourism industry firms as we expected.