Managerial Myopia and Brand Innovation

46 Pages Posted: 31 Jul 2018 Last revised: 11 Mar 2021

See all articles by Fred Bereskin

Fred Bereskin

University of Missouri

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance; National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Ke Na

Cheung Kong Graduate School of Business

Wendy Rotenberg

University of Toronto - Rotman School of Management

Date Written: February 24, 2021

Abstract

Using the newly available U.S. trademark dataset to measure the lifespan of new brands, we find that new brands’ survival rate significantly declines following managers’ myopic cuts in marketing budgets. This evidence is consistent with concerns raised by marketing managers that firms’ brand innovation is being sacrificed in order to manage reported earnings to meet short-term earnings targets. The observed effect is more pronounced for firms in industries where more resources are devoted to advertising expenditures and in more reputation-sensitive industries. Additional analyses show that the survival rate of new brands has a significantly positive impact on future sales growth and profitability, confirming the value-relevance of brand innovation and our findings about the detrimental effects of earnings management .

Keywords: Managerial myopia, brand names, trademarks, earnings targets

JEL Classification: M37, M41, M43, O31

Suggested Citation

Bereskin, Frederick L. and Hsu, Po-Hsuan and Na, Ke and Rotenberg, Wendy, Managerial Myopia and Brand Innovation (February 24, 2021). Available at SSRN: https://ssrn.com/abstract=3103340 or http://dx.doi.org/10.2139/ssrn.3103340

Frederick L. Bereskin

University of Missouri ( email )

Columbia, MO 65203
United States

Po-Hsuan Hsu

National Tsing Hua University - Department of Quantitative Finance ( email )

101, Section 2, Kuang-Fu Road
Hsinchu, Taiwan 300
China

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Ke Na

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

Wendy Rotenberg (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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