The impact of shareholder perk abolition on stock prices in Japan: Evidence from signaling, investor composition, perk convertibility, and industry type

Abstract

Japanese firms commonly use shareholder perk programs to attract and retain individual investors. However, the market implications of discontinuing such programs remain underexplored. This study investigates the impact of shareholder perk discontinuation announcements on stock prices in Japan, drawing on the signaling theory and behavioral finance, particularly the concept of loss aversion. Using a combination of event study methodology and cross-sectional regression analysis, the study reveals that perk discontinuation leads to significantly negative stock price reactions. This negative reaction is especially pronounced for firms with highly convertible perks (e.g., gift cards), those with a high proportion of individual shareholders, and firms operating in B2C industries. Furthermore, the magnitude of this negative reaction was found to be amplified by growth opportunities and mitigated by a simultaneous dividend increase, indicating firm-specific heterogeneity in the market’s response to perk discontinuation. By integrating these and other relevant firm attributes as explanatory and control variables (e.g., firm age) within a unified framework, this study offers a comprehensive evaluation of how various attributes influence investor responses. The findings contribute both theoretically and empirically to the literature on shareholder perks and provide practical implications for firms considering revisions to their shareholder perk policies.