The impact of the SARS outbreak on Taiwanese hotel stock performance: An event-study approach

Ming-Hsiang Chen; SooCheong Shawn Jang; Woo Gon Kim

doi:10.1016/j.ijhm.2005.11.004

The impact of the SARS outbreak on Taiwanese hotel stock performance: An event-study approach

Int J Hosp Manag. 2007 Mar;26(1):200-212. doi: 10.1016/j.ijhm.2005.11.004. Epub 2006 Mar 23.

Authors

Ming-Hsiang Chen¹, SooCheong Shawn Jang², Woo Gon Kim³

Affiliations

¹ Department of Finance, National Chung Cheng University, Chia-Yi, Taiwan, ROC.
² Department of Hospitality and Tourism Management, Purdue University, Stone Hall, Room B-9, West Lafayette, IN 47907-2059, USA.
³ School of Hotel and Restaurant Administration, Oklahoma State University, 210 HESW, Stillwater, OK 74078-6173, USA.

Abstract

The severe acute respiratory syndrome (SARS) outbreak in 2003 weakened the Taiwanese economy. The tourism industry suffered the most, experiencing the highest stock price decline (approximately 29 percent) within a month of the SARS outbreak. This research examined the effect of the SARS epidemic on Taiwanese hotel stock price movements using an event-study approach. Seven publicly traded hotel companies experienced steep declines in earnings and stock price during the SARS outbreak period. On and after the day of the SARS outbreak, Taiwanese hotel stocks showed significantly negative cumulative mean abnormal returns, indicating a significant impact of the SARS outbreak on hotel stock performance. Empirical findings could be used to prepare businesses for the similar epidemics, such as a deadly bird-flu epidemic.

Keywords: Event study; Hotel stocks; Severe acute respiratory syndrome (SARS); Taiwan.