When 1 + 1 > 2: How Investors React to New Product Releases Announced Concurrently with Other Corporate News

December 2016 | Sorescu, Alina

Firms routinely use press releases to announce the launch of their new products. An examination of these press releases shows that in approximately 7% of cases, firms issue new product announcements concurrently with other corporate announcements. However, the consequences of these actions are unknown, as event studies typically eliminate concurrent announcements in an attempt to avoid their confounding effects. The authors use a comprehensive sample of press releases issued by publicly traded U.S. firms to document the consequences of firms announcing the release of a new product concurrently with another corporate announcement that conveys good news. Drawing on Robert Merton’s (1987) model of capital market equilibrium with incomplete information, the authors identify three conditions that are conducive to the issuance of concurrent new product announcements. They then verify that under these conditions, the increase in shareholder value associated with concurrent announcements is higher than that associated with issuing two similar announcements separately. This research provides insights into how firms can leverage corporate communications to increase stock prices.

Author

Co-author(s)

  • Nooshin Warren

Publication(s)

Journal of Marketing

Web Link

http://journals.ama.org/doi/abs/10.1509/jm.15.0275