MARKET RESPONSE TO PRODUCT-STRATEGY AND CAPITAL-EXPENDITURE ANNOUNCEMENTS IN SINGAPORE - INVESTMENT OPPORTUNITIES AND FREE CASH FLOW

We examine the importance of investment opportunities and free cash fl ow in explaining the market response to announcements of product strat egies and capital expenditures. Our study, which uses Singapore data, supports the investment opportunities hypothesis that investments by h igh-q firms are worthwhile while those by low-q firms are not. We find no support for the free-cash-flow hypothesis. Our results are similar to those for R&D investments, which suggests that the availability, o r lack, of investment opportunities is an important consideration in a ssessing the value-enhancing potential of corporate, strategic investm ents in general.