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Journal Article

The Wealth Effect of New Product Introductions on Industry Rivals

Sheng‐Syan Chen, Kim Wai Ho and Kueh Hwa Ik
The Journal of Business
Vol. 78, No. 3 (May 2005), pp. 969-996
DOI: 10.1086/429650
Stable URL:
Page Count: 28
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We find that, on average, rivals of firms announcing new products experience a significantly negative wealth effect. We also show that rivals in technologically based industries experience the most significantly unfavorable effect. Rivals' share price response is more unfavorable when the wealth effect on the announcers is larger and when frequent announcers introduce new products. Smaller rivals and those with better investment opportunities also are more adversely affected. Further, highly leveraged rivals, especially those in concentrated industries, experience a greater wealth loss. However, we find that rivals' wealth effects are more favorable when the products introduced are very new.

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