The long-term performance of new product introductions

•New product introductions generate significantly positive abnormal stock returns in the three- and five-year post-announcement periods.•Firms' marketing capabilities and industry background, firm size, and the timing new products are introduced significantly affect shareholder gains.•The Carhart four-factor model, the zero-investment portfolio method, and the buy-and-hold return procedure yield consistent results.

This study investigates the long-term stock market performance of firms following announcements of new product introductions (NPIs). We find that firms announcing NPIs experience significantly positive abnormal stock returns in the three- and five-year post-announcement periods. Further, firms' marketing capabilities and industry background, firm size, and the timing new products are introduced significantly affect shareholder gains from NPIs. The Carhart four-factor model, the zero-investment portfolio method, and the buy-and-hold return procedure yield consistent results. Our findings show that investors on average do not fully capture the valuation impact of new products nor incorporate the information contained in the initial announcements.