Do Marketing Activities Enhance Firm Value? Evidence from M&A Transactions
European Management Journal, Forthcoming
45 Pages Posted: 18 Dec 2015
Date Written: December 17, 2015
In this paper, we use an event study approach and find that aggressive marketing activities of target firms prior to the M&A deal are not always compensated with greater premiums and favorable market reactions, which would represent the presence of a potential “window-dressing.” Further analysis shows that the positive association between marketing activities and deal performance is conditional on the change in institutional ownership prior to the deal, suggesting that institutional investors cherry-pick good targets with value-enhancing marketing activities. The results hold for both OLS and 2SLS after accounting for potential endogeneity. This paper contributes to the marketing-finance interface literature by providing more precise and direct evidence on how marketing strategies affect firm value.
Keywords: Marketing Strategy, M&As, Deal Premium, Announcement Returns, Institutional Ownership
JEL Classification: M30, G34
Suggested Citation: Suggested Citation