VGSF Finance Research Seminar

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

Art Vortrag/Diskussion
Vortragende/rLauren H. Cohen (Havard University)
Veranstalter Wirtschaftsuniversität Wien Buying the Verdict
Kontakt office@vgsf.ac.at

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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