Stock market reaction to capital expenditure announcements by UK firms

Saeed Akbar, Syed Zulfiqar Ali Shah, Issedeeq Saadi

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

The key objective of this article is to analyse the stock market reaction to capital expenditure announcements by UK firms. To attain such an objective, we adopt an 'event study' methodology. We analyse a large sample of 884 capital expenditure announcements made by 426 companies allocated in different sectors over a period of 14 years from 1990 to 2003. The results suggest a significant and positive relationship between capital spending announcements and share prices. Our results also suggest a positive (negative) and significant relationship between announcements of increase (decrease) in capital expenditure and abnormal stock returns. Market participants seem to respond positively to corporate capital expenditure decisions regardless of the types of projects in which the funds are to be invested.

Original languageEnglish
Pages (from-to)617-627
Number of pages11
JournalApplied Financial Economics
Volume18
Issue number8
Early online date21 Apr 2008
DOIs
Publication statusPublished - 1 May 2008
Externally publishedYes

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