HOW INVESTORS VALUE INDUSTRIAL POLICIES FOR E-BUSINESS FIRMS IN EMERGING MARKETS

E-business has created new industries that have added numerous new firms to world exchanges. Moreover, industry policies are important for e-business development in emerging markets. However, extant research on a linkage between e-business and financial performance has focused mostly on the influence of firms' behavior in developed markets, and understanding is limited regarding the effects of government administration on financial outcomes of firms in emerging markets. Therefore, we investigated the impact of e-business industrial policies in these markets by examining corresponding financial market responses. Our empirical investigation included an examination of financial market responses to e-business industrial policies released in China's emerging market. Specifically, we conducted an event study to investigate the impact of released policies on stock values of e-business firms. Our empirical analysis revealed the following. First, two types of industrial policies that facilitate e-business are associated with opposite abnormal returns on the release date. Specifically, concrete positive policies produce positive abnormal returns, while positive policies that are more general produce negative abnormal returns. Second, not all firms benefit equally from e-business policies. Specifically, policy value is strengthened or weakened by research and development and advertising expenditures. Therefore, managerial implications are applicable to investors, firms, and government.