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Stock Market Reaction to Capital Investment Decisions: Evidence from Business Relocations

Published online by Cambridge University Press:  06 April 2009

Su Han Chan ,
George W. Gau  and
Ko Wang
Su Han Chan
Affiliation:
Department of Finance, California State University at Fullerton, Fullerton, CA 92634
George W. Gau
Affiliation:
Department of Finance, University of Texas at Austin, Austin, TX 78712.
Ko Wang
Affiliation:
Department of Finance, California State University at Fullerton, Fullerton, CA 92634
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Abstract

We investigate the stock market reaction to 447 announcements of business relocation decisions in the 1978–1990 period. We find that the stock market reaction to such decisions is tied to the motive for the relocation and the implied prospects for the firm, with the type of facility being relocated playing an insignificant role. Our finding reconciles several results in the literature concerning the stock market reaction to announcements of capital investment decisions.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 30 , Issue 1 , March 1995 , pp. 81 - 100
Copyright
Copyright © School of Business Administration, University of Washington 1995

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