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VGSF Finance Research Seminar

Wirtschaftsuniversität Wien, Departments 3 D3.0.22511:00 - 12:30

Type Lecture / discussion
SpeakerLauren H. Cohen (Havard University)
Organizer Wirtschaftsuniversität Wien Buying the Verdict

The FRS in­forms about state-of-the-art re­search in Fin­ance.

We doc­u­ment evid­ence that firms sys­tem­at­ic­ally in­crease spe­cial­ized, loc­ally tar­geted ad­vert­ising fol­low­ing the firm be­ing taken to trial in that given loca­tion - pre­cisely fol­low­ing ini­ti­ation of the suit. In par­tic­u­lar, we use legal ac­tions brought against pub­licly traded firms over the 20 year sample period that pro­gress to trial from 1995-2014. In terms of mag­nitude, the in­crease is siz­able: tar­geted local ad­vert­ising in­creases by 23% (t=4.39) fol­low­ing the suit. Moreover, firms con­cen­trate these stra­tegic in­creases in loca­tions where the re­turn on their ad­vert­ising dol­lars are largest: in smal­ler, more con­cen­trated ad­vert­ising mar­kets where fewer com­pet­itor firms are ad­vert­ising. They fo­cus their ad­vert­ise­ment spikes spe­cific­ally to­ward jury tri­als, and in fact spe­cific­ally to­ward the most likely jury pool. Lastly, we doc­u­ment that these ad­vert­ising spikes are as­so­ci­ated with ver­dicts, in­creas­ing the prob­ab­il­ity of a fa­vor­able out­come.

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