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Attracting investor attention through advertising

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  • Dong Lou
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    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.

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    File URL: http://eprints.lse.ac.uk/54382/
    File Function: Open access version.
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    Bibliographic Info

    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 54382.

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    Length: 46 pages
    Date of creation: Jun 2013
    Date of revision:
    Handle: RePEc:ehl:lserod:54382

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    Postal: LSE Library Portugal Street London, WC2A 2HD, U.K.
    Phone: +44 (020) 7405 7686
    Web page: http://www.lse.ac.uk/
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    Related research

    Keywords: advertising; investor attention; insider sales; equity issues; Stock-financed mergers and acquisitions;

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    References

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    Cited by:
    1. Umit G. Gurun & Gregor Matvos & Amit Seru, 2013. "Advertising Expensive Mortgages," NBER Working Papers 18910, National Bureau of Economic Research, Inc.

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