The competitive effects of S&P 500 Index revisions |
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| Authors: | Sheng‐Syan Chen Yueh‐Hsiang Lin |
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| Affiliation: | 1. Department of Finance, College of Commerce, National Chengchi University, Taipei 11605, Taiwan;2. Department of Finance, College of Business, National Taipei University of Business, Taipei 10051, Taiwan |
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| 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. |
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| Keywords: | announcement effect capital investment competitive effect index revision market share |
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