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VI. Conclusion

In this study, we examine how the degree of product market competition affects the firm‟s decision to SEO announcements. According to previous literature, SEO announcements send a negative signal about poor investment opportunities prospect. We argue that, in the case of strategic interaction between firms, SEO announcement acquires a mimicking dimension.

Our results provide two important findings. We find that SEOs negative day returns will lower during the industry wave exists. On average, 0.39% negative returns in one day event windows disappear during the high industry wave.

Consistent with market timing hypothesis, firms follow the industry wave will perform better on their SEO abnormal returns. The other results also support industry concentration brings strategic interaction, which enhances the firm‟s mimicking behavior. These results are also robust in different industry classification. We confirm this intuition by showing that SEO firms in less concentrated industries outperform the market.

Our results blends corporate finance decision and industrial organization.

The study gives a few crumbs of information about mimicking SEO behavior.

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We hope provide some new ways regarding why firms tend to cluster their SEOs and why they observe SEOs happening in waves.

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Appendix A. Variables description

Variable Description

Panel A. SEO characteristics and description

INDSEOWAVE The sum of the number of SEOs announcements, excluding those of the firm in question, that occur in the same three-digit SIC code industry for all the other firms in the previous six months.

TOTALSEO Classify by three-digit SIC codes, defined as the number of firms within the given industry in the fiscal year.

Conc/SEOs A proxy to measure the effect on the probability of a SEO announcement resulting from an increase in both the concentration of the industry and the intensity of the SEOs intra-industry activity.

Panel B. variables related to firm characteristics

RUNUP The firm‟s buy-and-hold returns over the year prior the issue.

ROA Earnings divided by total assets (AT) in the year before the SEO filing date.

lnTA The logarithm of total assets (AT) in the year before the SEO filing date.

lnMKT The natural logarithm of the issuer‟s market capitalization (shares outstanding multiplied by price per share) on the announcement date.

HHI The Herfindahl-Hirschman Index, which is the sum of the squared fraction of industry sales by all firms in the 3-digit SIC industry for the year prior to the announcement.

Price The issue of SEO offer price.

lnTOBIN The natural log of Tobin's Q.