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A market reaction to DOD contract delay — Does the market reward poor performance?

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  • Robert Carden
  • Sonia E. Leach
  • Jeffrey S. Smith

Abstract

Civilian development projects occur faster than projects for the Department of Defense (DoD). Faster development either means quicker delivery (i.e. sales), or for DoD, it means a more capable warfighter. On average, DoD Acquisition Category One (ACAT I) development projects now take 15 years, an increase of 20%. These same companies producing civilian products faster fail to do so with their DoD contracts. This paper examines the relationship between DoD delay and its impact on shareholder wealth. The results show positive, significant wealth for shareholders at the announcement of a DoD delay, suggesting an insensitivity toward such production delays.

Suggested Citation

  • Robert Carden & Sonia E. Leach & Jeffrey S. Smith, 2008. "A market reaction to DOD contract delay — Does the market reward poor performance?," Review of Financial Economics, John Wiley & Sons, vol. 17(1), pages 33-45.
    • Handle: RePEc:wly:revfec:v:17:y:2008:i:1:p:33-45
    DOI: 10.1016/j.rfe.2007.02.004
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