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The competitive effects of S&P 500 Index revisions

Author

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  • Sheng‐Syan Chen
  • Yueh‐Hsiang Lin

Abstract

Firms added to the S&P 500 Index gain a competitive advantage over their non‐S&P 500 industry competitors. They experience positive stock valuation effects at the expense of competitors. The inclusion is associated with both reductions in financial constraints and the cost of equity and increases in capital investment for the newly added firms. When the increase in capital investment is greater, they gain more market share and enjoy better valuation effects. Rivals’ share price responses are negatively related to the announcement effect of the newly added firm. Deletions from the index, however, do not have symmetric effects.

Suggested Citation

  • Sheng‐Syan Chen & Yueh‐Hsiang Lin, 2018. "The competitive effects of S&P 500 Index revisions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(7-8), pages 997-1027, July.
    • Handle: RePEc:bla:jbfnac:v:45:y:2018:i:7-8:p:997-1027
    DOI: 10.1111/jbfa.12312
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    Cited by:

    1. Klaus Grobys, 2022. "On Survivor Stocks in the S&P 500 Stock Index," JRFM, MDPI, vol. 15(2), pages 1-24, February.
    2. Klaus Grobys & Yao Han & James W. Kolari, 2023. "Better Not Forget: On the Memory of S&P 500 Survivor Stock Companies," JRFM, MDPI, vol. 16(2), pages 1-16, February.

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