Attracting investor attention through advertising

Dong Lou

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper provides evidence that managers adjust firm advertising, in part, to attract investor attention and influence short-term stock returns. First, I show that increased advertising spending is associated with a contemporaneous rise in retail buying and abnormal stock returns, and is followed by lower future returns. Next, I document a significant increase in advertising spending prior to insider sales, and a significant decrease in the subsequent year. Additional analyses suggest that the inverted-V-shaped pattern in advertising spending around insider sales is most consistent with managers' opportunistically adjusting firm advertising to exploit the temporary return effect to their own benefit.

Keywords: advertising; investor attention; insider sales; equity issues; Stock-financed mergers and acquisitions (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2013-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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