Buying the Verdict

Lauren H. Cohen () and Umit G. Gurun ()
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Lauren H. Cohen: Harvard Business School, Boston, Massachusetts 02163; National Bureau of Economic Research, Boston, Massachusetts 02163
Umit G. Gurun: University of Texas at Dallas, Richardson, Texas 75080

Management Science, 2024, vol. 70, issue 7, 4167-4183

Abstract: We document evidence that firms systematically increase specialized, locally targeted advertising following the firm being taken to trial in that given location, precisely following initiation of the suit. In particular, we use legal actions brought against publicly traded firms over the 20-year sample period that progress to trial between 1995 and 2014. In terms of magnitude, the increase is sizable: targeted local advertising increases by 23% ( t = 4.37) following the suit. They focus their advertisement spikes specifically toward jury trials, and in fact specifically toward the most likely jury pool. Last, we document that these advertising spikes are associated with verdicts, increasing the probability of a favorable outcome.

Keywords: firm strategic behavior; litigation; strategic advertising (search for similar items in EconPapers)
Date: 2024
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