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Buying the Verdict

42 Pages Posted: 29 Jun 2017 Last revised: 21 Sep 2017

Lauren Cohen

Harvard Business School; National Bureau of Economic Research (NBER)

Umit G. Gurun

University of Texas at Dallas

Date Written: June 28, 2017

Abstract

We document strong evidence that firms systematically increase specialized, locally targeted advertising following the firm being taken to trial in a given location - precisely following initiation of the suit. In particular, we use all legal actions brought against publicly traded firms over the 20 year sample period that progress to trial from 1994-2014. In terms of magnitude, the increase is sizable: targeted local advertising increases by 23% (t=8.63) 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 find that the prevalence and intensity of this behavior is increasing over time.

Keywords: Litigation, Advertising, Verdict, Jury Influence, Corporate Response

JEL Classification: K10, K41, K42

Suggested Citation

Cohen, Lauren and Gurun, Umit G., Buying the Verdict (June 28, 2017). Available at SSRN: https://ssrn.com/abstract=2994572

Lauren Cohen (Contact Author)

Harvard Business School ( email )

Rock Center 321
Soldiers Field
Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/lcohen

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Umit G. Gurun

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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