Buying the Verdict

Lauren H. Cohen and Umit Gurun

No 24542, NBER Working Papers from National Bureau of Economic Research, Inc

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 from 1995-2014. In terms of magnitude, the increase is sizable: targeted local advertising increases by 23% (t=4.39) following the suit. Moreover, firms concentrate these strategic increases in locations where the return on their advertising dollars are largest: in smaller, more concentrated advertising markets where fewer competitor firms are advertising. They focus their advertisement spikes specifically toward jury trials, and in fact specifically toward the most likely jury pool. Lastly, we document that these advertising spikes are associated with verdicts, increasing the probability of a favorable outcome.

JEL-codes: D22 G30 K41 K42 L14 M21 M37 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-bec, nep-law and nep-mkt
Note: AP CF LE PE POL PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Lauren H. Cohen & Umit G. Gurun, 2024. "Buying the Verdict," Management Science, vol 70(7), pages 4167-4183.

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