International oligopoly and stock market linkages: The case of global airlines

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Transportation Research Part E: Logistics and Transportation Review, ISSN: 1366-5545, Vol: 44, Issue: 4, Page: 621-636

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GONG, Stephen X. H.; FIRTH, Michael Arthur; CULLINANE, Kevin
Elsevier BV; Pergamon Press
Business, Management and Accounting; Social Sciences; Decision Sciences; Information transfer; Airlines; Earnings; Oligopoly; Stock market performance; Event study methodology; Finance
article description
This paper investigates the effect of oligopolistic rivalry on spillovers in financial reporting. Using an event study methodology and focusing on global airlines, we find that firms experience discernable abnormal stock price reactions at the announcement of unexpected earnings by rival airlines. The extent of the price reactions is related to the extent of rivalry between the announcing and non-announcing firms, among other factors. Our empirical evidence, which is inconsistent with the contestable markets hypothesis, confirms an association between the stock market performance of players in a global industry and the extent of inter-firm rivalry in the product market.