Are events and security programs relevant to stock returns of transport firms?

Abstract

Would market-disclosed information on major events and supply chain security related programs invoke an immediate response or irrational investment behavior from retail investors of publicly listed transport companies? Using an event study method to examine the stock returns of transport companies in Singapore since 1999, we find evidence of negative and significant abnormal returns for the 911 attack and the Avian flu. Positive abnormal returns are correlated with the Indian Ocean tsunami. For security related programs, such as the container security initiative, and the adoption and implementation of the International Security and Port Facility (ISPS) code, cumulative abnormal returns around the adoption of the ISPS code are significantly positive and increasing over time; but the cumulative abnormal returns around the implementation of the ISPS code are negative. Hence, from a shareholder value perspective, any announcement of security related programs to enhance the continuity of the supply chain is cheerful news for the investor of transport firms.