Can Brands Circumvent Marketing Regulations? Exploiting Umbrella Branding in Financial Markets

Marketing Science, Forthcoming

55 Pages Posted: 25 Mar 2019

See all articles by Yan Lu

Yan Lu

University of Central Florida - College of Business Administration

Debanjan Mitra

University of Connecticut - Department of Marketing

David K. Musto

University of Pennsylvania - Finance Department

Sugata Ray

University of Alabama - Department of Economics, Finance and Legal Studies

Date Written: March 1, 2019

Abstract

Governments often regulate marketing activities to ensure marketers do not misinform consumers and obtain ‘unfair’ advantages. Yet, ample research finds such regulations may be ineffective since marketers are able to circumvent them. We examine if umbrella branding, a marketing strategy of multiple products sharing a common brand, can be used to circumvent marketing regulations on a given product. Specifically, in the asset management industry, we examine if hedge funds, faced with a comprehensive marketing ban, benefited from the advertising by their umbrella brand mutual fund affiliates and, if so, whether the hedge funds exploited this effect. We find higher advertising by mutual fund affiliates leads to a significant increase in sales of umbrella brand hedge funds and that hedge funds’ circumstances in a trailing period impact the likelihood of advertising by their umbrella brand mutual fund affiliates. More important, using the 2012 JOBS Act that removed hedge funds’ marketing restrictions as a natural experiment, we find that hedge funds’ trailing circumstances had significantly less impact on umbrella branded mutual fund advertising after the passage of the JOBS Act. These findings are consistent with hedge funds using umbrella branding to circumvent the marketing ban.

Keywords: Umbrella Branding, Advertising Regulation, Natural Experiment, Financial Services Marketing, Public Policy

JEL Classification: G23

Suggested Citation

Lu, Yan and Mitra, Debanjan and Musto, David K. and Ray, Sugata, Can Brands Circumvent Marketing Regulations? Exploiting Umbrella Branding in Financial Markets (March 1, 2019). Marketing Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3344868

Yan Lu (Contact Author)

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

Debanjan Mitra

University of Connecticut - Department of Marketing ( email )

Storrs, CT 06269
United States

David K. Musto

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Sugata Ray

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

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