Long-Run Performance Following Corporate Outsourcing Transactions

Abstract

This paper primarily focuses on testing the long-run impact of outsourcing deals on the value of contract signatories. The long-run post-event changes in both stock and accounting related performance are examined. We find that in the long run client firms realize significantly positive buy-and-hold abnormal stock returns on average when compared with different groups of control firms. We also find evidence that client firms experience significant improvement in operating efficiency in three years after the contract effectiveness. Our findings suggest that outsourcing contracts are beneficial for client firms in the long run and this benefit is reflected by their ex post stock and accounting performance.