In the second essay, we extend the existing literature to identify a fundamental signal from advertising (SADV) which the stock market and financial analysts might recognize as value-relevant information. We find that increases in the proposed advertising signal increase the cumulative abnormal stock returns (CAR) after controlling for the accounting and finance variables known to affect CAR. However, surprisingly, we find that the value-relevant advertising signal (SADV) is not related to financial analysts' expectation of firm value and their earnings forecasts, and that SADV increases the errors in analysts' earnings forecasts. We thus provide empirical evidence that analysts under-react to the fundamental advertising signal, SADV, despite the fact that the measure is impounded in firms' stock prices. With the findings, this study joins a growing literature that demonstrates a link between marketing and financial value of a firm, and furthermore encourages finance professionals' better understanding of marketing accountability.For example, what are their firma#39;s historical levels of advertising/sales, Raamp;D/sales , and systematic risk, both independently and compared ... Theoretical research using complementary methods (e.g., in-depth interviews, surveys, field studies)anbsp;...
|Title||:||Essays on Advertising's Impact on Firm Risk, Firm Value, and Analysts' Forecasts|
|Author||:||Min Chung Kim|
|Publisher||:||ProQuest - 2008|