No Access

THE PRICE SENSITIVITY OF BUSINESS SERVICE OUTSOURCING ANNOUNCEMENTS BY UK COMPANIES

Associate Professor of Accounting and Finance, Inter-American University, San Juan P. R., L M Rivera #54, Vega Alta, Puerto Rico 00692, USA

Tel: 787-645-0071

Search for more papers by this author

and

DOUGLAS WOOD

Emeritus Professor, Manchester Business School, Booth Street West, Manchester, MIS 6PB, UK

Tel: +44(0)161-275-6590

Search for more papers by this author

https://doi.org/10.1142/S0219622003000562Cited by:3 (Source: Crossref)

Abstract

This article investigates the market reaction to a sample of announcements of business service outsourcing arrangements made by UK quoted companies between 1991 and 1997. Event study methodology is applied to daily stock returns to measure the reaction, in the form of excess returns, immediately prior to and at the date of an outsourcing contract announcement. The conclusion is that initial announcements tend to enjoy positive and significant reaction and that the larger companies in the sample show a more positive reaction than smaller companies. Overall outsourcing announcements appear to be associated with excess returns but the absence of any recognized basis for disclosure prevents a complete analysis of such events.

Keywords:

References

G. H. Anthes, Computer World 25(1), 1 (1991). Google Scholar
W. J. Baumol , Business behaviour, value and growth ( Harcourt , 1967 ) . Google Scholar
F. Black, J. Business 45, 444 (1972). Google Scholar
E. Booker, Computer World 25(36), 95 (1991). Google Scholar
S. J. Brown and J. B. Warner, J. Financial Economics 8, 205 (1980), DOI: 10.1016/0304-405X(80)90002-1. Web of Science, Google Scholar
S. J. Brown and J. B. Warner, J. Financial Economics 13, 3 (1985). Web of Science, Google Scholar
D. J. Bryce and M. Useem, European Management Journal 16(6), 635 (1998), DOI: 10.1016/S0263-2373(98)00040-1. Google Scholar
T. E. Copeland and J. F. Weston , Financial Theory and Corporate Policy ( Addison-Wesley , Reading, MA , 1988 ) . Google Scholar
E. F. Famaet al., Int. Economic Review 1 (1969), DOI: 10.2307/2525569. Google Scholar
E. F. Fama, J. Finance 25, 383 (1970), DOI: 10.2307/2325486. Web of Science, Google Scholar
E. F. Fama and M. H. Miller , The Theory of Finance ( Holt, Rinehart and Winston , New York , 1972 ) . Google Scholar
P. Healey and K. Palepu, J. Financial Economics 21, 147 (1988). Google Scholar
R. L. Huber, Harvard Business Review 121 (1993). Google Scholar
D. Jenings, Long Range Planning 29(3), 393 (1996), DOI: 10.1016/0024-6301(96)00025-8. Web of Science, Google Scholar
M. C. Lacity and R. Hirschheim, Sloan Management Review 73 (1993). Google Scholar
M. C. Lacity, I. P. Willcocks and D. F. Feeny, Harvard Business Review 84 (1995). Google Scholar
M. C. Lacity, I. P. Willcocks and D. F. Feeny, Sloan Managemsent Review 13 (1996). Google Scholar
R. N. Langlois and P. L. Robertson , Firms, Market, and Economic Change ( Routledge , London , 1995 ) . Google Scholar
J. Lintner, Review Economic Statistic 47(1), 13 (1965), DOI: 10.2307/1924119. Web of Science, Google Scholar
L. Loh, The Economics and Organization of Information Technology Governance, Doctoral Thesis, Sloan School of Management, MIT, 1992 . Google Scholar
L. Loh and N. Venkatraman, J. Management Information Systems 9(1), 7 (1992). Web of Science, Google Scholar
L. Loh and N. Venkatraman, Information System Research 3(4), 334 (1992), DOI: 10.1287/isre.3.4.334. Web of Science, Google Scholar
A. C. MacKinlay, J. Economic Literature XXXV, 13 (1997). Google Scholar
K. McLellan, MIS Outsourcing, Organizational Networks, and Competitive Advantage, Working Paper, School of Business Administration, The University of Western Ontorio, Canada, January 1991 . Google Scholar
R. Marris , The Economic Theory of Managerial Capitalism ( Macmillan , 1964 ) . Google Scholar
S. McClelland, Telecommunications 26(8), 31 (1992). Google Scholar
K. McLellan, MIS outsourcing, organizational networks, and competitive advantage, Working Paper, School of Business Administration, The University of Western Ontario, Canada, 1991 . Google Scholar
A. McWilliams and D. Siegel, Academy of Management Journal 40(3), 626 (1997), DOI: 10.2307/257056. Web of Science, Google Scholar
R. H. Myer , Classical and Modern Regression with Applications , 2nd edn. ( PWS-Kent Publishing Company , Boston, USA , 1986 ) . Google Scholar
S. Myers and M. Majluf, J. Financial Economics 13, 187 (1984), DOI: 10.1016/0304-405X(84)90023-0. Web of Science, Google Scholar
J. M. Patell, J. Accounting Research 14(2), 246 (1976), DOI: 10.2307/2490543. Web of Science, Google Scholar
M. J. Piore and C. F. Sable , The Second Industrial Divide ( Basic Books , New York , 1984 ) . Google Scholar
D. A. Peak, The Risk and Benefits of Outsourcing on the Information Systems Function and the Firm, Doctoral Dissertation, University of North Texas (0158), USA, 1994 . Google Scholar
M. E. Porter , Competitive Strategy: Techniques for Analyzing Industries and Competitors ( The Free Press , New York , 1980 ) . Google Scholar
C. K. Prahalad and G. Hamel, Harvard Business Review 79 (1990). Google Scholar
C. F. Sable, Reversing Industrial Decline? Industrial Structure and Policy in Britain and Her Competitors, eds. P. Hirst and J. Zeitlin (Oxford, 1989) pp. 17–70. Google Scholar
C. F. Sable and J. Zeitlin, Past and Present 108, 133 (1985). Google Scholar
W. F. Sharpe, J. Finance 19(3), 425 (1964), DOI: 10.2307/2977928. Web of Science, Google Scholar
T. P. Stank and A. B. Maltz, Journal of Marketing — Theory and Practice 45 (1996). Web of Science, Google Scholar
A. L. Tuckeret al., Contemporary Portfolio Theory and Risk Management (West Publishing Company, St. Paul, MN, 1994) pp. 292–320. Google Scholar
O. E. Williamson , The Economics of Discretionary Behaviour ( Kershaw , 1967 ) . Google Scholar
O. E. Williamson , Market and Hierarchies: Analysis and Antitrust Implication ( Free Press , New York , 1975 ) . Google Scholar