Abstract
A key element in generating firm cash flows is the marketing strategy developed by a firm's advertising agency. This study examines both the stock market reaction and selected firm performance measures associated with Wall Street Journal announcements of advertising agency terminations and accounts placed in review (potential terminations). Besides finding a negative investor response to each event type, we report a significant decline in stock market values before such announcements. An examination of time series accounting data reveals a deterioration in firm sales growth before and after the announcement. Declines also occur in both liquidity and operating income. Our evidence is mixed regarding whether industry trends are responsible for these changes in financial position. We do not find an improvement in firm performance following the agency termination or potential termination. Strategic implications and directions for future research are discussed.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
