Interpreting the Stock Returns to New Product Announcements: How the past Shapes Investors’ Expectations of the Future

Warren, Nooshin L.; Sorescu, Alina

doi:10.1509/jmr.14.0119

Cited by 52 publications

(40 citation statements)

References 62 publications

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“…The second characteristic is the announcement source—whether the CEO or another representative of the firm (e.g., media relations personnel, another C-suite executive or manager) informs stakeholders of a firm's CSA stance. Investors pay attention to who makes firm announcements and view the prominence of that individual as a signal of the importance of the announcement (Barber and Odean 2008; Warren and Sorescu 2017). The CEO’s communication with stakeholders greatly matters, and investors carefully analyze these communications (Craig and Amerrnic 2010).…”

Section: Theory Development and Research Hypothesesmentioning

confidence: 99%

Corporate Sociopolitical Activism and Firm Value

Bhagwat¹,

Warren²,

Beck³

et al. 2020

Journal of Marketing

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257

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Stakeholders have long pressured firms to provide societal benefits in addition to generating shareholder wealth. Such benefits have traditionally come in the form of corporate social responsibility. However, many stakeholders now expect firms to demonstrate their values by expressing public support for or opposition to one side of a partisan sociopolitical issue, a phenomenon the authors call “corporate sociopolitical activism” (CSA). Such activities differ from commonly favored corporate social responsibility and have the potential to both strengthen and sever stakeholder relationships, thus making their impact on firm value uncertain. Using signaling and screening theories, the authors analyze 293 CSA events initiated by 149 firms across 39 industries, and find that, on average, CSA elicits an adverse reaction from investors. Investors evaluate CSA as a signal of a firm’s allocation of resources away from profit-oriented objectives and toward a risky activity with uncertain outcomes. The authors further identify two sets of moderators: (1) CSA’s deviation from key stakeholders’ values and brand image and (2) characteristics of CSA’s resource implementation, which affect investor and customer responses. The findings provide new and important implications for marketing theory and practice.

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Section: Theory Development and Research Hypothesesmentioning

confidence: 99%

Corporate Sociopolitical Activism and Firm Value

Bhagwat¹,

Warren²,

Beck³

et al. 2020

Journal of Marketing

Self Cite

257

200

View full text Add to dashboard Cite

show abstract

“…Relatedly, it is also possible that a company's current managers (particularly more recent appointees) may believe that investors will give the current management team insufficient credit for their individual skill and efforts if they are perceived to be simply following the firm's preordained innovation trajectory (Warren & Sorescu, 2017). As a result, corporate managers may use a firm's exploratory innovative activities as an opportunity to emphasize the specific contribution of the current management team to overall firm value.…”

Section: Introductionmentioning

confidence: 99%

Innovation Search Strategy and Predictable Returns

et al. 2021

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Because of the intangible and highly uncertain nature of innovation, investors may have difficulty processing information associated with a firm’s innovation search strategy. Due to cognitive and strategic biases, investors are likely to pay more attention to unfamiliar explorative patents rather than incremental exploitative patents. We find that innovative firms focusing on exploitation rather than exploration tend to generate superior subsequent short-term operating performance. Analysts do not seem to detect this, as firms currently focused on exploitation tend to outperform the market’s near-term earnings expectations. The stock market also seems unable to accurately incorporate information about a firm’s innovation search strategy. We find that firms with exploitation strategies are undervalued relative to firms with exploration strategies and that this return differential is incremental to standard risk and innovation-based pricing factors examined in the prior literature. This result suggests a more nuanced view on whether stock market pressure hampers innovation, and may have implications for optimal firm financing choices and corporate disclosure policy. This paper was accepted by David Simchi-Levi, finance.

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“…Several firms file multiple cases per year, with a few filing trademark cases monthly. When investors observe recurring firm-specific events, they incorporate expectations of the future occurrence of these events into the firm's current stock price (Warren and Sorescu 2017). As a result, the reaction to a recurrent event is smaller than it would be if the event had been unexpected.…”

Section: Event Study Resultsmentioning

confidence: 99%

Hands off my Brand! The Financial Consequences of Protecting Brands through Trademark Infringement Lawsuits

Ertekin

Sorescu

Houston

2018

Journal of Marketing

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Well-known brands are frequently imitated, misused, or tampered with. Firms facing these threats routinely turn to the legal system and file trademark infringement lawsuits in an attempt to prevent revenue losses and brand equity dilution. In this article, the authors address the largely unexplored issue of brand protection. First, they categorize all major types of trademark infringement. Second, using signaling and prospect theories, they present a conceptual model that outlines the financial consequences of defending a brand in court. The authors test the predictions of this framework using a large sample of trademark infringement lawsuits and find that although investors react negatively in the short term to firms’ filing and even to firms’ winning such cases, the long-term performance of firms that successfully leverage the legal system to protect their brands is positive.

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Interpreting the Stock Returns to New Product Announcements: How the past Shapes Investors’ Expectations of the Future

Cited by 52 publications

References 62 publications

Corporate Sociopolitical Activism and Firm Value

Corporate Sociopolitical Activism and Firm Value

Innovation Search Strategy and Predictable Returns

Hands off my Brand! The Financial Consequences of Protecting Brands through Trademark Infringement Lawsuits

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