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Dong Lou, Attracting Investor Attention through Advertising, The Review of Financial Studies, Volume 27, Issue 6, June 2014, Pages 1797–1829, https://doi.org/10.1093/rfs/hhu019
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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. Second, 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.