Does Advertising Influence Investors? Evidence and Research Propositions

Abstract

Event studies and market analyses provide ample evidence that companies' advertising tactics affect their share prices. However, we have little understanding of the specific mechanism(s) through which advertising might influence investors or how investors may differ from one another in the degree of advertising's effect on their choices. This study synthesizes findings from advertising studies with those from the field of behavioral finance. A model for future research is offered in which investing expertise, access to company information, and motivation affect perceptions of a company's advertising efforts, which in turn drive perceptions of management quality, management optimism, and company value.