The Intragroup Contagion Effect of Stock Price in Taiwan Business Groups : The Case of Recommondation of Security Firms

• Main Authors: Sheng-Hao Tsai, 蔡昇豪
• Other Authors: Chun-Chieh Liao
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/22398647068116377900

碩士 === 中國文化大學 === 國際貿易學系碩士班 === 98 === Business group plays a popular form of organizations in emerging economies, and is often seen as the main driving force for national economic development sources. Al-though elements within the enterprise business groups are independent legal entity, their stock prices always exists some strong linkage. To show the existence and the market’s valuation of contagion within affiliated firms, we examine the effect of a stock recom-mendation announcement by domestic and foreign securities company on the market value of equity of the other firms in the same group. Contagion implies that an affiliate’s stock price depends not only on its own status and financial condition, but also on those of the other affiliates. Since stock recommendations are an important indicator of view-points generated through a external professional organizations, an upward (downward) announcement can serve as a valuable source of information about the firm’s ability to have a positive (negative) contagion effect on other firms and thus affect the equity value of nonannouncing affiliates. We find that the announcement of upward ratings by a affili-ated firm has a positive and significant effect on the abnormal return of other firms in the same group (“nonannouncing affiliates”). The same logic exists in the downward an-nouncement, but with a smaller scale of reaction. Overall, our findings provide strong support for the view that there is contagion effect within business groups in emerging markets as Taiwan, suggesting that the interdependence among affiliations by investors should be recognized when the value of group firms is being evaluated.