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Purpose The purpose of this paper is to examine the impact of new product development on corporate value, by analyzing the stock market response to the announcement of new product developments. Design/Methodology/Approach Based on the event study methodology, the empirical analysis sampled 442 new product announcements made by 150 export manufacturing firms listed on the KOSPI and KOSDAQ markets in Korea, for the period 2001-2020. Findings The results support the first hypothesis that the announcement of new product has a positive effect on abnormal returns. In terms of the determinant of the abnormal returns, the firm-specific variables investment opportunities and debt ratio were positively associated, and firm size and free cashflow variables were negatively related to abnormal returns. Being in a high-tech industry was found to have a positive impact. In terms of the Competitive Strategy Measure, the result supported the hypothesis that strategic substitute competition has a greater positive impact on the abnormal return of the announcing firms. R&D intensity and firm dominance were found to be insignificant. The magnitude of newness embedded in a new product was also found to be insignificant. Research Implications This study further extends the existing literature in that it empirically tested the role of a new product on corporate value, and provides an empirical analysis of the determinants that affect the announcing firm’s abnormal returns gained in response to new product announcement, including firm-related variables and the competitive nature of the market.
