Do stock prices undervalue investments in advertising?

Under the efficient market hypothesis, the stock price incorporates the full value of a firm’s advertising. If so, advertising spending should not be associated with future abnormal stock returns. Nevertheless, from 1995 to 2015, advertising spending often leads to abnormal stock returns the following year. The strongest results surface for consumer goods and services where advertising used to build brand equity can carryover from one year to the next. No significant differences arise for healthcare, industrial goods, or retailer advertising. Healthcare and industrial goods advertising is often modest. Retailer advertising that builds traffic should have little if any carryover into the following year. These results may help marketing managers defend an advertising budget whose benefits carryover into the following year, but hurt current profits. Having more investment analysts on Wall Street with a marketing background should help reduce this overly conservative “wait and see” discount for carryover advertising.     

Consumers’ evaluation of brand portfolios

This study explores how consumers evaluate lodging brand portfolios and shows the important role of brand-specific associations and brand portfolio effects in forming brand attitudes toward extended brands. The findings suggest, in general, that both brand-specific associations and brand portfolio affect consumers’ evaluations of extended brands. In addition, brand fit and familiarity are found to be important in consumers’ attitude formation in that they moderate attitude transferability between a brand portfolio and its extended brands. Managerial implications and directions for future research are discussed.     

Economic Diplomacy and International Trade: ASEAN’s Quest to Value‐Claim

Utilising economic diplomacy theory, this study specifies a statistical model to reveal ASEAN members’ capacity to negotiate better international trade outcomes. Examining imports into ASEAN members from 134 nations between 1980 and 2001, we find that ASEAN’s diplomats were able to pursue more ‘value‐claiming’ in economic diplomacy than expected. While our results support the commonly accepted view in economic diplomacy that smaller nations are pressured to accept trade outcomes desired by larger nations, we also find support for a new perspective: smaller nations obtain more favourable trade outcomes, as members of a regional trade bloc, which cannot be achieved as individual nations. We find that ASEAN’s conversion to a fully fledged regional trade agreement in 1992 significantly enhanced this capacity. This study adds a different perspective to the substantial literature examining cases in trade and economic diplomacy.     

Driving forces of coordination costs in distributor–supplier relationships: toward a middle-range theory

Transaction cost analysis (TCA) has inspired many empirical studies in marketing channels and business-to-business marketing. However, the vast majority of these studies have been conducted within the context of a single nation, making it hard to determine whether the empirical relationships derived from the framework are universal. Highlighting the influence of the national context in which the economic exchange relationship is embedded, we elaborate on the manner by which one form of transaction costs, namely, coordination costs, can be both a direct and an indirect function of two key governance challenges: safeguarding and adaptation. Taking a middle-range approach, we propose that the process by which coordination costs are evoked is a combination of context-excluded and context-embedded links. The hypothesized relationships are tested with data collected in parallel national surveys of industrial distributors in two large national economies with different cultures: the United States and Japan. The results support our predictions of both context-excluded and context-embedded links with the exception of the effect of environmental volatility.     

A new score test for unit roots in heterogeneous panels — Residual likelihood approach

Using the marginal likelihood of the residual, we propose new score type unit root tests for heterogeneous panels. Our tests are more powerful than the t-bar test of Im et al. (2003) for panels with many cross-sectional units and short time spans.     

Multinationals' response to major disasters: how does subsidiary investment vary in response to the type of disaster and the quality of country governance?

We investigate the response of multinational corporations (MNCs) to major disasters at the subsidiary level. We examine the type and severity of the disaster and whether and how country governance moderates the relationship between exogenous disaster risk and subsidiary investment. We test our hypotheses with a panel dataset of 71 large European MNCs and their subsidiaries (2001–2006) with 31,285 total observations. Findings suggest that the number of a firm's foreign subsidiaries is likely to decrease in response to terrorist attacks or technological disasters but not natural disasters, regardless of the severity of the event. For terrorist activities, MNC subsidiary‐level disinvestment is less likely when the quality of host country governance is higher. Copyright © 2011 John Wiley & Sons, Ltd.