Advertising, Breadth of Ownership, and Liquidity

Gustavo Grullon

The Review of Financial Studies, 2004, vol. 17, issue 2, 439-461

Abstract: We provide empirical evidence that a firm's overall visibility with investors, as measured by its product market advertising, has important consequences for the stock market. Specifically we show that firms with greater advertising expenditures, ceteris paribus, have a larger number of both individual and institutional investors, and better liquidity of their common stock. Our findings are robust to a variety of methodological approaches and to various measures of liquidity. These results suggest that the investors' degree of familiarity with a firm may affect its cost of capital and consequently its value. Copyright 2004, Oxford University Press.

Date: 2004
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