The impact of the final product to the share price of the producer

Abstract

Alexander Vasilyevich Solomatin - Non-governmental educational institution "Moscow International Higher School of Business" MIRBIS "(Institute).

E-mail: avs1129@mail.ru

Yaroslav Vasilyevich Solomatin - Closed Joint-Stock Company Commercial Bank "Citibank".

E-mail: Sun928@yandex.ru

In this work, we study how the release of the product to the market (release of computer game in this case) may affect the share price of its developer/publisher.Financial data were obtained for 9 public companies – computer games’ developers/publishers, which satisfied three predetermined criteria.  Then all games developed/published by the firms were examined and 69 games published during period from 2004 to 2013 were selected in accordance with three other criteria. After that the data were processed by two methodologies. First methodology is just a set of ordinary linear regressions, in which cumulative daily return of developers’/publishers’ shares is a dependent variable and financial performance of the corresponding firm, industry and country; as well as real and expected quality of published game; are independent variables. Second methodology is one of the types of event study methods, in which abnormal return and cumulative abnormal return of the developers’/publishers’ shares are dependent variables. In both cases for estimation of real quality of the game average expert score from Metacritic website was used, whereas expected quality was modeled using adaptive expectations method, which took into account real quality of previous games of corresponding developer/publisher.Results of the first method claim, that information about game release and its quality improves quality of the share price’s forecast on more than 25-45%, but only for two days after the release. Results of the second method state, that release of any game causes a short-term abnormal increase in share price on 1,83%, and release of a “good game” causes 3,96% increase. The results can be used by investors to receive additional return and by producers’ management bodies to understand better the factors, which affect the value of their companies.  They also allow to conclude that release of the product (computer game) has a positive short-term impact on share price of the producer, especially if the quality of the product turned out to be higher than expected.