The Announcement Effects of Regional Tourism Industrial Policy:The Case of the Hainan International Tourism Island Policy in China

China's Hainan Island has a rich diversity of attractions and opportunities for nature-based tourism, outdoor recreation, and sporting activities. Moreover, Hainan Island has a natural and socioeconomic base and environment, hosting the implementation of a tourism industrial policy. On December 31, 2009, China's State Council announced to the world the national policy of the establishment of Hainan International Tourism Island. Hence, China's Hainan Island is well suited for investigating the announcement effects of regional tourism industrial policy on the market values of firms in a tourist destination region. Based on a sample of 19 listed firms in Hainan, or Hainan concept firms, consisting of various industries, we explore the announcement effects of the national policy of Hainan International Tourism Island using an event-study approach. Two statistical methods, mean adjusted and market-model adjusted, are employed to calculate the daily abnormal returns and the cumulative abnormal returns. The results with and without considering the clustering issue show that, first, the averages of (standardized) accumulative abnormal returns are not different from zero prior to the announcement; second, the (standardized) accumulative abnormal returns of Hainan concept stock continuously go up over trading days after the announcement of a regional tourism industrial policy. As a robustness check, we also investigate the effect of the policy on Guangdong concept listed firms. We find no significant impacts of the policy announcement on the Guangdong concept listed firms. In sum, these findings indicate that regional tourism industrial policy is valuable not only to the tourism industry in the destination region but also to other industries in that region.