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Frenemies: Corporate Advertising Under Common Ownership

Author

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  • Ruichang Lu

    (Guanghua School of Management, Peking University, Beijing 100871, China)

  • Qiaowei Shen

    (Guanghua School of Management, Peking University, Beijing 100871, China)

  • Tenghui Wang

    (Guanghua School of Management, Peking University, Beijing 100871, China)

  • Xiaojun Zhang

    (Guanghua School of Management, Peking University, Beijing 100871, China)

Abstract

In this paper, we investigate the impact of ownership structure on corporate advertising expenditures. Using mutual fund mergers as an exogenous shock to ownership structure, we find that competing firms owned by the same institutional blockholders experience a significant reduction in advertising expenditure. The reduction in advertising expenditure is more likely to occur in the presence of higher coordination benefits or lower coordination costs. Specifically, this effect is more pronounced for firms in more competitive industries, in higher advertising-intensity industries, with greater common ownership, with more concentrated institutional ownership, and with headquarters located in the same state. Overall, our empirical evidence indicates that ownership by common institutional investors significantly affects corporate advertising strategy.

Suggested Citation

  • Ruichang Lu & Qiaowei Shen & Tenghui Wang & Xiaojun Zhang, 2022. "Frenemies: Corporate Advertising Under Common Ownership," Management Science, INFORMS, vol. 68(6), pages 4645-4669, June.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:6:p:4645-4669
    DOI: 10.1287/mnsc.2021.4098
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