Finance Seminar: Avrid Hoffman
Shareholder Complaints and Advertising Investments
Shareholder complaints put pressure on firms, yet firms rarely address the issues raised in these complaints. The authors examine whether publicly-listed firms respond in an alternative way by increasing advertising investments in an effort to ward off performance shortfalls associated with shareholder complaints. Analyzing a unique data set of all shareholder complaints submitted to S&P 1500 firms between 2001 and 2014, the authors document that firms increase their advertising investments following shareholder complaints, and that advertising investments are effective in weakening the decline in firm value. Furthermore, results suggest that firms are more likely to engage in an advertising investment increase when shareholder complaints pertain to nonfinancial concerns.