Do Marketing Activities Enhance Firm Value? Evidence from M&A Transactions

European Management Journal, Forthcoming

45 Pages Posted: 18 Dec 2015

See all articles by Juyoun Ryoo

Juyoun Ryoo

Dongguk University

Jin Jeon

Dongguk University

Cheolwoo Lee

Ferris State University

Date Written: December 17, 2015

Abstract

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

Ryoo, Juyoun and Jeon, Jin and Lee, Cheolwoo, Do Marketing Activities Enhance Firm Value? Evidence from M&A Transactions (December 17, 2015). European Management Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2704920

Juyoun Ryoo

Dongguk University ( email )

26 Pil-dong 3-ga
Jung-gu
Seoul, Seoul 100-715
Korea, Republic of (South Korea)

Jin Jeon (Contact Author)

Dongguk University ( email )

26 Pil-dong 3-ga
Jung-gu
Seoul, Seoul 100-715
Korea, Republic of (South Korea)

Cheolwoo Lee

Ferris State University ( email )

119 South State Street, BUS 366
Big Rapids, MI 49307
United States

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