The aim of this study is to examine how European companies’ stock price is affected by an announcement about foreign direct investment in one of the BRIC countries. Another aim for the study is to examine if the market reacts differently to the three modes of entry methods in a given BRIC country and to examine if the market reacts differently to different European countries. The study also set out to answer if there were any effects of the three modes of entry that was visible a short time after the announcement. 

To answer and examine this, the authors used the event study approach. The study was conducted with a sample of 47 companies from France, Norway, Spain, Sweden and Germany. The time period in which the study was conducted within was between the years 2001-2011. The three modes of entry that was examined were Joint Venture, Acquisition and organic expansion. The three modes of entry were submitted to conduct a hypothesis test to determine whether or not an abnormal return was created during the event window in which the announcement took place. A hypothesis test was also conducted during the post event window to determine if the announcement effect is visible a short time period after the announcement. The event window was 11 days, five days before the announcement and five days after the announcement. The post event window was 30 days after the event window.

Companies with the same mode of entry in the same BRIC country were submitted to examine whether or not the announcement effect was different for the three modes of entry. Companies from the same European country were joined together after which BRIC country the announcements were about.

The result of the study was that significant positive abnormal return was created during both the event and post event window. There were also modes of entry in which the announcement effect was visible a short time after the announcement.