A Rude Awakening: Internet Shakeout in 2000

A Rude Awakening: Internet Shakeout in 2000 This study explores various value-drivers of business-to-consumer (“B2C”) Internet companies' share prices both before and after the market correction in the spring of 2000. Although many market observers had predicted that the shakeout would eventually occur (e.g., Perkins and Perkins 1999), the ultimate and previously unanswered challenge lay identifying which stocks would fall and which ones would survive the shakeout. We develop an empirical valuation model and provide evidence that the Internet stocks that this model suggests were relatively over-valued prior to the Internet stock market correction experienced relatively larger drops in their price-to-sales ratios when the shakeout occurred. This result is robust to the inclusion of competing explanatory variables suggested by the economics literature related to industry rationalizations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

A Rude Awakening: Internet Shakeout in 2000

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Publisher
Springer Journals
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1023/A:1011675227890
Publisher site
See Article on Publisher Site

Abstract

This study explores various value-drivers of business-to-consumer (“B2C”) Internet companies' share prices both before and after the market correction in the spring of 2000. Although many market observers had predicted that the shakeout would eventually occur (e.g., Perkins and Perkins 1999), the ultimate and previously unanswered challenge lay identifying which stocks would fall and which ones would survive the shakeout. We develop an empirical valuation model and provide evidence that the Internet stocks that this model suggests were relatively over-valued prior to the Internet stock market correction experienced relatively larger drops in their price-to-sales ratios when the shakeout occurred. This result is robust to the inclusion of competing explanatory variables suggested by the economics literature related to industry rationalizations.

Journal

Review of Accounting StudiesSpringer Journals

Published: Oct 3, 2004

References

  • Value-relevance of Nonfinancial Information: The Wireless Communications Industry
    Amir, E.; Lev, B.

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