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.
| Original language | English |
|---|---|
| Pages (from-to) | 4645-4669 |
| Number of pages | 25 |
| Journal | Management Science |
| Volume | 68 |
| Issue number | 6 |
| Early online date | 8 Nov 2021 |
| DOIs | |
| Publication status | Published - Jun 2022 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:Copyright: © 2021 INFORMS
Funding
R. Lu and Q. Shen acknowledge the financial support of the National Natural Science Founda-tion of China [Grants 71903005 and 8200904061]. R. Lu also acknowledges the support of Peking University Guanghua School of Management [Richudongfang Young Scholar Research Grant].
Keywords
- advertising expenditure
- common ownership
- coordination benefit
- cost