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Intra-Industry Effects of Delayed New Product Introductions

Intra-Industry Effects of Delayed New Product Introductions We find that for a sample of 324 announcements of delayed new product introductions in 52 industries from 1989 to 1997, the rivals overall experience significantly negative share price response. The results suggest that, for the sample as a whole, the information-signaling effect dominates the competitive effect. We further classify the rivals' share price response by industry and find that about 60% of industries have negative response. We also find that a product delay conveys more negative information about the competitors in those industries that are more likely to have product delays. Finally, we show that rivals' share price response is significantly positively related to the announcement effect on the product delay firm, the degree of industry competition, and the industry growth opportunities, and is significantly negatively related to the degree of relatedness of the announcing firm to the industry, and to the level of the announcing firm's free cash flow relative to that of its competitors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Pacific Basin Financial Markets and Policies World Scientific Publishing Company

Intra-Industry Effects of Delayed New Product Introductions

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Publisher
World Scientific Publishing Company
Copyright
Copyright ©
ISSN
0219-0915
eISSN
1793-6705
DOI
10.1142/S0219091507001136
Publisher site
See Article on Publisher Site

Abstract

We find that for a sample of 324 announcements of delayed new product introductions in 52 industries from 1989 to 1997, the rivals overall experience significantly negative share price response. The results suggest that, for the sample as a whole, the information-signaling effect dominates the competitive effect. We further classify the rivals' share price response by industry and find that about 60% of industries have negative response. We also find that a product delay conveys more negative information about the competitors in those industries that are more likely to have product delays. Finally, we show that rivals' share price response is significantly positively related to the announcement effect on the product delay firm, the degree of industry competition, and the industry growth opportunities, and is significantly negatively related to the degree of relatedness of the announcing firm to the industry, and to the level of the announcing firm's free cash flow relative to that of its competitors.

Journal

Review of Pacific Basin Financial Markets and PoliciesWorld Scientific Publishing Company

Published: Sep 1, 2007

Keywords: Product delays intra-industry effects information-signaling effect competitive effect

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