When do the stock market returns to new product preannouncements predict product performance? Empirical evidence from the U.S. automotive industry

M. Berk Talay (), M. Billur Akdeniz () and Ahmet H. Kirca ()
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M. Berk Talay: University of Massachusetts Lowell
M. Billur Akdeniz: University of New Hampshire
Ahmet H. Kirca: Michigan State University

Journal of the Academy of Marketing Science, 2017, vol. 45, issue 4, No 7, 513-533

Abstract: Abstract Substantial research has examined how stock market reactions to marketing actions affect subsequent marketing decisions. However, prior research provides limited insights into whether abnormal stock returns to a marketing action actually predict the future performance resulting from that action. This study focuses on new product preannouncements (NPPAs) and investigates the relationship between short-term stock market returns to an NPPA and the post-launch new product performance under various industry and firm conditions. Findings based on a dynamic panel data analysis of 208 NPPAs in the U.S. automotive industry between 2001 and 2014 reveal that stock returns associated with an NPPA are not an appropriate forward-looking measure of future product performance. However, under specific conditions (i.e., when the preannouncement is specific, the preannounced new product has low innovativeness, the preannouncing firm has a high reputation and invests heavily in advertising, and the preannouncement environment is less competitive), abnormal stock returns to NPPAs actually predict the future performance of new products. Thus, this study extends the marketing–finance and innovation literature with its focus on the conditions that affect the predictive power of immediate stock returns for the future performance of new products.

Keywords: Marketing–finance interface; New product preannouncements; Stock market reactions; Information asymmetry; Dynamic panel data (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s11747-016-0507-4

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