Frenemies: Corporate Advertising Under Common Ownership

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.