International oligopoly and stock market linkages : the case of global airlines
Transportation Research Part E: Logistics and Transportation Review
Information transfer; Airlines; Earnings; Oligopoly; Stock market performance; Event study methodology
This paper investigates the effect of oligopolistic rivalry on spillovers in financial reporting. Using an event study methodology and focusing on global airlines, we find that firms experience discernable abnormal stock price reactions at the announcement of unexpected earnings by rival airlines. The extent of the price reactions is related to the extent of rivalry between the announcing and non-announcing firms, among other factors. Our empirical evidence, which is inconsistent with the contestable markets hypothesis, confirms an association between the stock market performance of players in a global industry and the extent of inter-firm rivalry in the product market.
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Paper presented at the 10th Annual Conference of the Air-Transport-Research-Society, May, 2006, Nagoya, Japan.
Gong, S. X. H., Firth, M., & Cullinane, K. (2008). International oligopoly and stock market linkages: The case of global airlines. Transportation Research Part E: Logistics and Transportation Review, 44(4), 621-636. doi: 10.1016/j.tre.2007.05.008