The competitive effects of S&P 500 Index revisions
Journal
Journal of Business Finance and Accounting
Journal Volume
45
Journal Issue
7-8
Pages
997-1027
Date Issued
2018-07
Author(s)
Lin, Yueh Hsiang
Abstract
Firms added to the S&P 500 Index gain a competitive advantage over their non-S&P 500 industry competitors. They experience positive stock valuation effects at the expense of competitors. The inclusion is associated with both reductions in financial constraints and the cost of equity and increases in capital investment for the newly added firms. When the increase in capital investment is greater, they gain more market share and enjoy better valuation effects. Rivals’ share price responses are negatively related to the announcement effect of the newly added firm. Deletions from the index, however, do not have symmetric effects.
Subjects
announcement effect | capital investment | competitive effect | index revision | market share
SDGs
Publisher
WILEY
Type
journal article