Title: Unmixed signals: stock market reaction to subsequent announcements of strategic alliances

Authors: Chao Zhao; Tie-Nan Wang

Addresses: School of Management, Harbin Institute of Technology, 2 Yikuang Street, Harbin, Hei Longjiang, China ' School of Management, Harbin Institute of Technology, 2 Yikuang Street, Harbin, Hei Longjiang, China

Abstract: In contrast to initial announcements, subsequent announcements of strategic alliances are more effective signals transferring more specific and credible progress information to investors. However, no comprehensive analysis of information updates on alliance progress activities exists. We address this limitation by distinguishing the signalling effects between initial and subsequent disclosures of strategic alliances. Using event study, the signalling effect is measured by cumulative abnormal returns with alliance data from China during 2001 and 2016. We find that investors react positively and significantly to both initial and subsequent disclosures, but in different reaction patterns. Specifically, due to information leakage effects, the stock market reacts negatively to subsequent reports from day -5 to -3 and then, reacts positively both in an immediate term (on day 0) and over the subsequent event window with fluctuations. Additionally, the stock market significantly rewards alliance performance announcements, but responds negatively to progress and termination reports. This study contributes to the strategic alliance literature and helps managers in making information disclosure strategies.

Keywords: strategic alliances; post-formation dynamics; alliance progress; alliance termination; information disclosure; information updates; initial announcements; subsequent announcements; signalling effects; stock returns; stock market reaction patterns; event study; change management.

DOI: 10.1504/IJISCM.2017.087973

International Journal of Information Systems and Change Management, 2017 Vol.9 No.2, pp.125 - 148

Received: 21 Dec 2016
Accepted: 24 Jun 2017
Published online: 13 Nov 2017 *

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