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New product preannouncements, advertising investments, and stock returns

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

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. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Chien-Wei Chen & Min-Hsien Chiang & Chi-Lin Yang, 2014. "New product preannouncements, advertising investments, and stock returns," Marketing Letters, Springer, vol. 25(2), pages 207-218, June.
    • Handle: RePEc:kap:mktlet:v:25:y:2014:i:2:p:207-218
    DOI: 10.1007/s11002-013-9253-2
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    References listed on IDEAS

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    Cited by:

    1. Truong, Yann & Pinkse, Jonatan, 2019. "Opportunistic behaviors in green signaling: When do firms engage in symbolic green product preannouncement?," International Journal of Production Economics, Elsevier, vol. 218(C), pages 287-296.
    2. Bhattacharya, Abhi & Sardashti, Hanieh, 2022. "The differential effect of new product preannouncements in driving institutional and individual investor ownership," Journal of Business Research, Elsevier, vol. 149(C), pages 811-823.
    3. M. Berk Talay & M. Billur Akdeniz & Ahmet H. Kirca, 2017. "When do the stock market returns to new product preannouncements predict product performance? Empirical evidence from the U.S. automotive industry," Journal of the Academy of Marketing Science, Springer, vol. 45(4), pages 513-533, July.
    4. Veronika NOVOTNA & Stanislav SKAPA, 2018. "Dynamic Model Of New Product Launch Impact On Stock Market Participants," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 12(1), pages 396-405, November.
    5. Wang, Xingyuan & Liu, Yun & Wang, Shuyang & Chen, Haipeng (Allan), 2022. "Keep it vague? New product preannouncement, regulatory focus, and word-of-mouth," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).
    6. Yun Kyung Oh & Huseyin Gulen & Jung-Min Kim & William T. Robinson, 2016. "Do stock prices undervalue investments in advertising?," Marketing Letters, Springer, vol. 27(4), pages 611-626, December.
    7. Veronika NOVOTNA & Stanislav Å KAPA & Bernard NEUWIRTH, 2019. "Analysis Of A Non-Linear Dynamic Financial System," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 13(1), pages 288-297, November.

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