Production Suspension Announcement and Market Value of the Firm: Evidence from Korea

Abstract

We investigate 589 production suspension announcements during from 2000 to 2015 in Korea to identify determinants of production suspension, event, operating and financial characteristics. We find that restructuring announcements have negative impact on stock returns while other reasons such as labor dispute and disaster, do not have. We show new evidence that the firm experiences restructuring and permanent plant closing has significantly more negative impact on the stock market. Also we find that the firm possesses low financial risk has significantly more positive impact on the stock returns. It seems that, experiencing sales declining is not the determinant of production suspension.