Abstract
Firms often use new product preannouncements (NPPAs) to attract investors and inform them about innovative offerings in the pipeline. We observe that the appeal of an NPPA differs for retail and institutional investors. Utilizing prospect theory, we argue that the two types of investors face unequal levels of uncertainty and are dissimilarly loss averse due to varying levels of knowledge and access to resources. This results in varying attitudes towards investment horizon, risk-taking, and preference for information sources. We find investor proclivity toward an NPPA depends on several factors, including the short-term abnormal return, the valence of coverage in media and analyst reports, the firm's risk profile, and the exploration emphasis of the firm. Moreover, we show that higher levels of institutional ownership ultimately contribute to new product success. The results hold implications for strategies that managers can employ to increase investor ownership within the firm to fund innovation.
Sign-in/Register to access full text options 
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.
