New product preannouncements, advertising investments, and stock returns

Chien-Wei Chen (), Min-Hsien Chiang () and Chi-Lin Yang ()

Marketing Letters, 2014, vol. 25, issue 2, 207-218

Abstract: This study examines the synergistic effects of advertising spending and new product preannouncements (NPPAs) on stock market responses. The empirical results indicate that returns of preannouncing firms over both the short- and long-term could be improved by an increase in advertising expenditure. Additionally, the results also show that the positive impacts of earnings and revenues can be enhanced, while the negative influence of trading costs can be reduced, for preannouncing firms with higher advertising expenditures. The holding returns of institutional investors can also increase with greater spending on advertising. Therefore, marketing communication strategies that aim to reduce information asymmetry within NPPAs, coupled with greater advertising expenditures, would yield more favorable investor responses. Copyright Springer Science+Business Media New York 2014

Keywords: New product preannouncement; Advertising investment; Signaling; Information asymmetry; Stock return (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11002-013-9253-2

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