The impact of public contract awards on stock price movements

Aljarbou, Nouf 2026. The impact of public contract awards on stock price movements. PhD Thesis, Cardiff University. Item availability restricted.

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Abstract

Government procurement represents a significant component of public expenditure and is widely acknowledged as a key driver of productivity and economic development. However, to date there has been insufficient examination of the specific impact of procurement announcements on financial markets, thereby suggesting the need for a deeper empirical investigation. Although the existing research has explored the relationship between contract awards and firm performance in specific countries and industries, the evidence is limited in scope, lacks generalisability to broader contexts, and is outdated. This study addresses these gaps by examining how public procurement contract awards influence the stock market performance of firms comprising the FTSE 350 Index in the United Kingdom (U.K.), with particular emphasis on the speed of investors’ reactions and the heterogeneous effects observed across contract types, firms, and industries. The U.K. provides a distinctive and important context for this inquiry. As one of the largest procurement markets in Europe, it has long operated under European procurement regulations and more recent post-Brexit reforms have introduced additional layers of complexity. This dual regulatory structure creates a setting in which procurement announcements may elicit market responses that differ from those observed elsewhere. Moreover, this context enables differences in FTSE 350 market reactions between the periods of European Union (E.U.) membership and post-Brexit to be investigated. However, this study restricts its dataset to the year 2022. Following Brexit, contract announcements that pertain to the U.K. have significantly decreased in number. The Tenders Electronic Daily (TED) database has generally stopped publishing or advertising contract announcements relating to the U.K. As a result, the number of post-Brexit public award announcements included in the dataset declined markedly in 2021 and 2022. Changes in regulations and practices implemented following Brexit are likely to have contributed to this reduction. This decline may also be attributed to the uncertainty surrounding trade relations between the U.K. and the E.U. in the early post-Brexit period. D1839137 iv This study adopts a quantitative research design based on an event study methodology. Abnormal returns are assessed in relation to contract award announcements documented in the TED database which are correlated with the daily stock returns of FTSE 350 companies from 2006 to 2022. The analysis focuses on abnormal return patterns in the days surrounding the announcement date. The research investigates three sets of characteristics that may influence investors’ reactions. First, it examines contract-specific attributes, including award criteria, the awarding authority, contract size, type, structure, and procedure. Second, it considers firm-level fundamentals such as size, leverage, profitability, and growth. Third, investigating the extent to which investor reactions are shaped by the prevailing political context, including variations across different political environments and changes in leadership, such as changes in prime minister or the governing party. It assesses how these political factors influence market responses to public contract award announcements. In addition, this study analyses the interactions between the contract features and firm-level characteristics. It hypothesises that contract award announcements do not operate as uniform signals but are instead interpreted through a combined lens of contractual features and firm attributes, thereby generating different market responses. This study indicates that procurement announcements are not merely administrative disclosures but also vital informational signals in capital markets. The impact of these factors depends on both the contract structure and the fundamental characteristics of the firm. In addition to its primary role of securing goods and services for public service delivery, procurement also serves as a financial market indicator. Accordingly, procurement announcements function as informational triggers for financial markets. Their impact, however, is not immediate because statistically significant abnormal returns predominantly emerge on the third trading day following an announcement. This delay indicates that public contract award information is not fully absorbed at the time of disclosure owing to restricted accessibility, the ambiguous presentation of TED announcements, and the specialised expertise required to effectively interpret contract-related information. Variations in key criteria elicit distinct market reactions following contract announcements. For example, the type of contract significantly influences the response D1839137 v of investors. For instance, service contracts, although the most prevalent, do not elicit significant abnormal returns and are typically perceived to be routine. In contrast, supply contracts are associated with modest, delayed positive returns, thereby indicating some perceived value. Works contracts, however, tend to generate the most pronounced and often delayed negative abnormal returns, possibly due to investor concerns regarding project complexity and execution risks. Industry effects further illustrate these variations in market responses. Certain sectors, such as telecommunications, utilities, and technology, exhibit negative abnormal returns at varying intervals following an announcement. In contrast, the real estate and construction sectors experience immediate positive market reactions. Additionally, the electronic and electrical equipment and industrial transportation subsectors experience positive abnormal returns on the first and third days following an announcement, respectively. Firm characteristics also shape market responses, with small firms typically exhibiting more pronounced and volatile abnormal returns, particularly on the third day following an announcement, whereas medium-sized firms are more likely to experience negative abnormal returns during the event window. Additionally, firms operating with low levels of leverage benefit from significant positive abnormal returns on the third day, whereas those with medium and high levels of leverage experience a minimal reaction. These patterns underscore the nature and terms of the contract itself, the characteristics and dynamics of the industrial sector, and the unique attributes of the firm, such as its size, leverage, and financial health, all of which interact to shape investor perceptions and responses. This evidence indicates that the effect of contract awards on stock performance is shaped by a combination of contract-specific, industry-specific, and firm-specific factors, thereby highlighting the need for a precise, context-aware approach to analyse such occurrences. This study makes several important contributions. It provides the first systematic evidence from the U.K. of the stock market reaction to public contract award announcements. Theoretically, it contributes to discussions concerning market efficiency, signalling theory, and information asymmetry by demonstrating that market reactions to public contract award announcements occur gradually. The findings indicate that D1839137 vi procurement awards do not universally enhance firm value; their effects vary with contract specifics, industry settings, and individual firm attributes. For companies, such data illustrate the value of selecting which contracts to pursue and managing them carefully because both opportunities and risks are closely linked to contract design. Investors regard contract award announcements as conditional signals, their significance contingent upon factors such as contract size, award criteria, and the firm’s fundamentals. Investors often interpret procurement awards as signals of a firm’s capacity for sustainable growth because securing such contracts typically demonstrate strong operational management, effective leadership, and competitive positioning within an industry. These attributes are closely tied to the firm’s ability to efficiently manage its operations and deliver on contractual obligations. Investors tend to view larger or more selective awards even more favourably because they suggest a higher level of competence and reliability. The research also underscores that the particular contract structure profoundly affects the market’s response to these announcements. In a methodological sense, the study highlights the importance of addressing data inconsistencies and disclosure delays when examining procurement announcements. Weak reporting standards or delays in public disclosure can skew the findings and lead to inaccurate conclusions about market reactions or their effectiveness. The findings indicate several important considerations. Issuers should take great care when writing the communication for contract awards to ensure clarity and accuracy. Investors are advised to assess such announcements within the broader context of the firm’s operations and market conditions, rather than interpreting them as uniform signals of growth. Furthermore, policymakers ought to strengthen the reporting requirements for contract awards and enforce the immediate publication of these announcements. Such measures would help to enhance transparency and reduce the risk of information asymmetry in the market.

Item Type:	Thesis (PhD)
Date Type:	Completion
Status:	Unpublished
Schools:	Schools > Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General)
Uncontrolled Keywords:	1. Public contract awards 2. Stock market reactions 3. Event study 4. Abnormal returns 5. Tenders Electronic Daily (TED) 6. FTSE 350
Date of First Compliant Deposit:	15 October 2026
Last Modified:	15 Oct 2026 08:40
URI:	https://orca.cardiff.ac.uk/id/eprint/190173

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