ART - THE MARKET’S RESPONSE TO CONTRACT AWARD ANNOUNCEMENTS: GOVERNMENT VERSUS CORPORATE CONTRACTS 2002

The paper examines the effects of contract award announcements on the stock returns of successful grantees. The study compares contract awards granted by corporations to those granted by government bodies, and further classifies government grantors into federal (non-military), military, municipal, and foreign categories. The results suggest that contract awards granted by foreign governments are more lucrative than those granted by corporations or American governmental bodies. The paper also discusses the positive net present value hypothesis and the fair contract hypothesis, and proposes the government contract hypothesis, which suggests that contracts granted by government bodies may be more lucrative than those granted by corporations. The study conducts a cross-sectional analysis to test the government contract hypothesis while controlling for potentially confounding factors that could affect the market's response at the time the contract is awarded.