Investors' evaluations of price-increase preannouncements
Several firms preannounce their price increases with the expectation that such announcements will be evaluated favorably by investors. However, little is known about the actual effect they have on shareholder value. Accordingly, the authors present the first systematic empirical examination of inves...
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sg-smu-ink.lkcsb_research-68662019-01-28T08:59:34Z Investors' evaluations of price-increase preannouncements LIM, Leon Gim TULI, Kapil R. DEKIMPE, Marnik G. Several firms preannounce their price increases with the expectation that such announcements will be evaluated favorably by investors. However, little is known about the actual effect they have on shareholder value. Accordingly, the authors present the first systematic empirical examination of investors' evaluations of 274 price-increase preannouncements (PIPs). Results show that whereas the average increase in abnormal returns following a PIP is 0.51%, almost 41% of the PIPs result in negative abnormal returns. To explore this heterogeneity, the authors propose a conceptual framework that focuses on three key pieces of information that investors can use when evaluating a PIP: information on the nature (time to implementation and magnitude) of the preannounced price increase, the stated attribution for the preannounced price increase (demand and/or cost based), and information on prior PIP occurrences by the firm and its competitors. Results indicate that PIPs with greater time to implementation, higher own precedence and greater competitive precedence result in lower abnormal returns, while PIPs with higher magnitude and PIPs with an explicit demand attribution result in greater abnormal returns. 2018-09-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/5867 info:doi/10.1016/j.ijresmar.2018.06.001 https://ink.library.smu.edu.sg/context/lkcsb_research/article/6866/viewcontent/Investors_Price_Increase_afv.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Abnormal returns Event study Marketing-finance interface Preannouncement Price increase Finance and Financial Management Marketing |
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Abnormal returns Event study Marketing-finance interface Preannouncement Price increase Finance and Financial Management Marketing LIM, Leon Gim TULI, Kapil R. DEKIMPE, Marnik G. Investors' evaluations of price-increase preannouncements |
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Several firms preannounce their price increases with the expectation that such announcements will be evaluated favorably by investors. However, little is known about the actual effect they have on shareholder value. Accordingly, the authors present the first systematic empirical examination of investors' evaluations of 274 price-increase preannouncements (PIPs). Results show that whereas the average increase in abnormal returns following a PIP is 0.51%, almost 41% of the PIPs result in negative abnormal returns. To explore this heterogeneity, the authors propose a conceptual framework that focuses on three key pieces of information that investors can use when evaluating a PIP: information on the nature (time to implementation and magnitude) of the preannounced price increase, the stated attribution for the preannounced price increase (demand and/or cost based), and information on prior PIP occurrences by the firm and its competitors. Results indicate that PIPs with greater time to implementation, higher own precedence and greater competitive precedence result in lower abnormal returns, while PIPs with higher magnitude and PIPs with an explicit demand attribution result in greater abnormal returns. |
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LIM, Leon Gim TULI, Kapil R. DEKIMPE, Marnik G. |
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LIM, Leon Gim TULI, Kapil R. DEKIMPE, Marnik G. |
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LIM, Leon Gim |
title |
Investors' evaluations of price-increase preannouncements |
title_short |
Investors' evaluations of price-increase preannouncements |
title_full |
Investors' evaluations of price-increase preannouncements |
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Investors' evaluations of price-increase preannouncements |
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Investors' evaluations of price-increase preannouncements |
title_sort |
investors' evaluations of price-increase preannouncements |
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Institutional Knowledge at Singapore Management University |
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2018 |
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https://ink.library.smu.edu.sg/lkcsb_research/5867 https://ink.library.smu.edu.sg/context/lkcsb_research/article/6866/viewcontent/Investors_Price_Increase_afv.pdf |
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