Impact of New Product Announcements on Stock Prices (Evidence from the Indian Automobile Industry)

New products are often seen as a sine qua non for fuelling future success of any organization. Designing, manufacturing and marketing new and innovative products has the potency to lend competitive advantage to a firm. The contribution of new products to the top-line as well as the bottom-line can be accurately gauged after they have been launched and are made available to the target market. At the outset however, the importance of the new product to the organization and the stakeholder's sentiment can be captured in the stock price when the new product announcement is made. The present study analyzes the market reaction to new product announcements made in the Indian automobile industry. A total of 19 new product announcements made between 2010 and 2016 by 3 different automobile manufacturers in India have been examined in the study. The standard event study methodology has been used to examine whether cumulative abnormal returns accrue to the firm when new product launch announcements are made. The study findings suggest that market reaction to various new product announcements can be termed as a mixed bag so far as individual manufacturers are concerned. However, collectively the automobile manufacturing companies have benefitted on the announcement date and (-2, +2) event window.