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Can Advertising Investments Counter the Negative Impact of Shareholder Complaints on Firm Value?

Simone Wies, Arvid Oskar Ivar Hoffmann, Jaakko Aspara and Joost M.E. Pennings

JM Insights in the Classroom

Full Citation: ​
Wies, Simone, Arvid O. I. Hoffmann, Jaakko Aspara, and Joost M. E. Pennings (2019), “Can Advertising Investments Counter the Negative Impact of Shareholder Complaints on Firm Value?,” Journal of Marketing, 83 (4), 58-80.

Firms that receive shareholder complaints increase advertising investments to protect firm value.

Abstract Article
Shareholder complaints put pressure on publicly-listed firms, yet firms rarely directly improve the actual issues raised in these complaints. We examine whether firms respond in an alternative way by altering advertising investments in an effort to ward off the financial damage associated with shareholder complaints. By analyzing a unique data set of shareholder complaints submitted to S&P 1500 firms between 2001 and 2016, supplemented with qualitative interviews of executives of publicly-listed firms, we document that firms increase advertising investments following shareholder complaints and that such an advertising investment response mitigates a post-complaint decline in firm value. Furthermore, results suggest that firms are more likely to increase advertising investments when shareholder complaints are submitted by institutional investors, pertain to nonfinancial concerns, and relate to topics that receive high media attention. The findings provide new insights on how firms address stock market adversities with advertising investments and inform managers about the effectiveness of such a response.


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Topic Areas: ​
Marketing Communications; Marketing Strategy; ​​​​ ​​​​

Special thanks to Kelley Gullo and Holly Howe, Ph.D. candidates at Duke University, for their support in working with authors on submissions to this program. 

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Simone Wies holds the SAFE Junior Professorship of Marketing of Financial Products, Goethe University Frankfurt, Research Center SAFE, Germany.

Arvid Oskar Ivar Hoffmann is Professor of Marketing, University of Adelaide Business School, Australia.

Jaakko Aspara is Vice-Rector, Dean of Research, and C. Grönroos Professor of Marketing, Hanken School of Economics, Finland.

Joost M.E. Pennings is Professor of Finance and Professor of Marketing, Maastricht University, Marketing-Finance Research Lab, Netherlands; and AST Professor in Commodity Futures Markets, Wageningen University, Netherlands.