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Market Reaction to Entry Timing of Corporate Capital Investment Announcement: Evidence from Announcement-Period Abnormal Returns and Analysts' Earnings Forecast Revisions

Author

Listed:
  • Sheng-Syan Chen

    (Department of Finance, College of Management, National Taiwan University, 85 Roosevelt Road, Section 4, 106 Taipei, Taiwan, ROC)

  • Xuan-Qi Su

    (Department of Finance, College of Management, National Taiwan University, 85 Roosevelt Road, Section 4, 106 Taipei, Taiwan, ROC)

Abstract

The main purpose of this study is to investigate the relative advantages and disadvantages of first-mover hypotheses by examining the role of entry timing in the announcement effects of corporate capital investment. Our empirical results suggest that those firms first announcing their capital investment will experience greater share-price effects than the followers in the same industry. In addition, the financial analysts tend to revise upward their announcement-period earnings forecasts for those capital investment announcers, suggesting that announcements of capital investment convey positive information about the earnings prospects of the announcing firms. Furthermore, analysts' revisions of earnings forecasts subsequent to such announcements are more favorable for leading-announcer firms than the followers. Overall, our findings provide fully support for the first-mover advantages hypothesis, indicating the importance of the entry timing when announcing a corporate capital investment.

Suggested Citation

  • Sheng-Syan Chen & Xuan-Qi Su, 2010. "Market Reaction to Entry Timing of Corporate Capital Investment Announcement: Evidence from Announcement-Period Abnormal Returns and Analysts' Earnings Forecast Revisions," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 13(04), pages 495-515.
    • Handle: RePEc:wsi:rpbfmp:v:13:y:2010:i:04:n:s0219091510002049
    DOI: 10.1142/S0219091510002049
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    Cited by:

    1. Dimitrios Koutmos & Konstantinos Bozos & Dionysia Dionysiou & Neophytos Lambertides, 2018. "The timing of new corporate debt issues and the risk-return tradeoff," Review of Quantitative Finance and Accounting, Springer, vol. 50(4), pages 943-978, May.
    2. Chuntai Jin & Tianze Li & Steven Xiaofan Zheng, 2016. "IPO Offering Size and Analyst Forecasts," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(03), pages 1-25, September.
    3. Christopher Edmonds & Ryan Leece & John Maher, 2013. "CEO bonus compensation: the effects of missing analysts’ revenue forecasts," Review of Quantitative Finance and Accounting, Springer, vol. 41(1), pages 149-170, July.

    More about this item

    Keywords

    Capital investment; entry timing; earnings forecasts; revisions;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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