Firm Value:

ISBN: 9783639076783

$53.07 $45.11

Over the last decade, an increasing number of
outsourcing contracts have been signed. We
investigate a large sample of outsourcing contracts
signed by firms listed on the US markets from 1990
through 2003. We construct a data set that identifies
the outsourcing client and vendor firms and use this
data set to examine announcement effects on firm
value and the post-event changes in both the stock
and accounting measures of performance. We find that
around the contract announcement date, vendor firms
as a whole group experience significantly positive
average abnormal stock returns; while client firms
realize positive abnormal returns when their sizes
are small, when they outsource to bigger vendors,
when they are opaque firms and need to focus on their
core activities, and when their liquidity levels are
low. We also find evidence that client firms
experience both significantly positive buy-and-hold
abnormal stock returns and significant improvement in
operating efficiency in three years following the
contract effectiveness. Our study bridges efficient
capital market theory and firms’ business strategies,
providing management a useful guidance with their
outsourcing decisions.

Firm Value:
Ning Gao
VDM Verlag Dr. Müller
Published Date:
Paperback / softback
Product Dim.:
8.66 H x 5.91 W (inches)

Ning Gao

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