Plant closing and market value of the firm

Abstract

We investigate 501 production suspension announcements during from 2000 to 2015 in Korea to identify determinants of plant closing decision, event, operating and financial characteristics. We find that restructuring and uncertain 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 higher firm-specific financial risk has significantly more negative impact on the stock returns. It seems that, experiencing operational declining is the reason of production suspension, but we find that it does not affect firm’s post-operating performances.