Market Response to the Diversification Strategy of Internet Technology Companies: A Case Study of Xiaomi
DOI:
https://doi.org/10.54097/x01tvr46Keywords:
Diversification Strategy, Event Study, Cumulative Abnormal Returns.Abstract
On March 30, 2021, Lei Jun, Chairman of Xiaomi Technology Co., Ltd. (hereinafter referred to as Xiaomi), announced that Xiaomi will establish a wholly-owned subsidiary responsible for the innovative electric vehicle business. After three years of research and development, Xiaomi released its first electric car, Xiaomi SU7, on March 28, 2024. This paper uses the event study method to compare the event of Xiaomi's announcement of its entry into the automotive field with the release of its first car. The study examines how the two events affect Xiaomi's stock price. The results demonstrate that the impact of Xiaomi's release of its first car on its stock price is more evident through the significance test. This shows that the first practical implementation of Xiaomi's automotive strategy has achieved remarkable results and met market expectations. This study is significant for studying the company's diversification strategic transformation by studying the changes in Xiaomi's stock price.
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