New product preannouncements, advertising investments, and stock returns

Chien Wei Chen, Min-Hsien Chiang, Chi Lin Yang

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)

Abstract

This study examines the synergistic effects of advertising spending and new product preannouncements (NPPAs) on stock market responses. The empirical results indicate that returns of preannouncing firms over both the short- and long-term could be improved by an increase in advertising expenditure. Additionally, the results also show that the positive impacts of earnings and revenues can be enhanced, while the negative influence of trading costs can be reduced, for preannouncing firms with higher advertising expenditures. The holding returns of institutional investors can also increase with greater spending on advertising. Therefore, marketing communication strategies that aim to reduce information asymmetry within NPPAs, coupled with greater advertising expenditures, would yield more favorable investor responses.

Original languageEnglish
Pages (from-to)207-218
Number of pages12
JournalMarketing Letters
Volume25
Issue number2
DOIs
Publication statusPublished - 2014 Jan 1

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics and Econometrics
  • Marketing

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