The capital market spillover effect of product market advertising: Evidence from stock price synchronicity

Yajie Chen, Qinlin Zhong () and Fuxiu Jiang
Additional contact information
Yajie Chen: Renmin University of China
Qinlin Zhong: Renmin University of China
Fuxiu Jiang: Renmin University of China

Frontiers of Business Research in China, 2020, vol. 14, issue 1, 1-21

Abstract: Abstract We analyze whether product market advertising has a spillover effect on stock price synchronicity by transmitting firm-specific information to the capital market and attracting more investor attention. Using a sample of Chinese listed firms from 2009 to 2017, we find that firms with greater advertising expenditures have lower stock price synchronicity. The results are robust after we address endogeneity concerns. In accord with our hypothesis that product market advertising increases the amount of firm-level information capitalized into stock prices through the information channel, we find that the impact of advertising on synchronicity is more pronounced for firms with a higher degree of information asymmetry and firms in the consumer-product industry. Further tests show that product market advertising enhances the ability of current period returns to reflect future earnings, and thus rules out that the negative relationship between advertising and synchronicity is driven by noise trading. Our results imply that product market advertising plays an informative role and improves information efficiency in a capital market.

Keywords: Advertising; Stock price synchronicity; Spillover effect; Product market; Capital market; Investor attention; Information asymmetry (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1186/s11782-020-00078-2 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:fobric:v:14:y:2020:i:1:d:10.1186_s11782-020-00078-2

Ordering information: This journal article can be ordered from
https://fbr.springeropen.com/

DOI: 10.1186/s11782-020-00078-2

Access Statistics for this article

Frontiers of Business Research in China is currently edited by Jiye Mao, Ziliang Deng and Steven Shuye Wang

More articles in Frontiers of Business Research in China from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().