The impact of an announcement of land acquisition in auctions on real estate firms' stock return in Hong Kong

Abstract

Purpose – The purpose of this paper is to examine the abnormal stock return of Hong Kong real estate firms following news of land acquisition and identify determinants to the abnormal stock return. Design/methodology/approach – The paper employs the event-study methodology and multivariate regression to test factors that are hypothesized to have effects on the abnormal return. Findings – The paper indicates that on land acquisition announcement there is a significant positive price reaction. Also the market capitalization and debt-to-equity ratio of a firm is associated negatively with the level of abnormal price reaction. Practical implications – This study has identified significant positive abnormal stock return following the news of land acquisitions by developers in the context of Hong Kong. It has also documented negative correlation between abnormal stock return and two specific factors of a firm, namely, market capitalization and debt-to-equity ratio. Originality/value – This paper identifies significant positive abnormal stock return pursuant to land acquisitions by firms.