Although changes to the channel system are among a firm’s most critical
decisions, prior research has neglected to examine the impact of channel
expansions on firm value. This article investigates whether a firm’s
announcement of an increase in distribution intensity or the
establishment of a new channel influences firm value. The authors also
consider the moderating role of context-specific firm, market, and
channel strategy contingencies. They test their hypotheses with an event
study of 240 announcements of major channel expansions in the United
States, Germany, and China. The results indicate that channel expansions
affect firm value (i.e., through abnormal stock returns). However, the
two types of channel expansions affect firm value differently. Whereas
the establishment of a new channel positively influences firm value,
reactions to an increase in distribution intensity are highly
contingent. For example, firms operating in exceedingly turbulent or
competitive markets experience firm value reductions in response to an
increase in distribution intensity. Notably, the same two environmental
contingencies enhance firm value when the firm establishes a new
channel. [ABSTRACT FROM AUTHOR]