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Most event studies rely on cumulative abnormal returns, measured as percentage changes in stock prices, as their dependent variable. Stock price reflects the value of the operating business plus non-operating assets minus debt. Yet, many events, in particular in marketing, only influence the value of the operating business, but not non-operating assets and debt. For these cases, the authors argue that the cumulative abnormal return on the operating business, defined as the ratio between the cumulative abnormal return on stock price and the firm-specific leverage effect, is a more appropriate dependent variable. Ignoring the differences in firm-specific leverage effects inflates the impact of observations pertaining to firms with large debt and deflates those pertaining to firms with large non-operating assets. Observations of firms with high debt receive several times the weight attributed to firms with low debt. A simulation study and the reanalysis of three previously published marketing event studies shows that ignoring the firm-specific leverage effects influences an event study's results in unpredictable ways.
AS WE INCREASINGLY RELY ON SEARCH ENGINES AS AN IMPORTANT SOURCE OF INFORMATION TO SUPPORT OUR DECISIONS, SEARCH ENGINES BECAME AN IMPORTANT VENUE FOR FIRMS TO ATTRACT ATTENTION AND SECURE THE LONGEVITY OF THEIR OPERATIONS. THIS ARTICLE DISCUSSES THE RESULTS OF OUR EMPIRICAL STUDIES ON HOW TO CAPTURE A FIRM’S VISIBILITY IN ORGANIC SEARCH AND HOW IT AFFECTS ITS SHORT- AND LONG-TERM FINANCIAL PERFORMANCE.
EMITTERS OF MUTUAL FUNDS AND OTHER FINANCIAL PRODUCTS LACK INFORMATION ABOUT THEIR CUSTOMERS. THEY MOSTLY OPERATE WITH A PRODUCT-CENTRIC MARKE TING CONCEPT. WITH INFORMATION ABOUT CUSTOMERS, THEY COULD SHIFT TOWARDS A MORE CUSTOMER-CENTRIC STRATEGY. HOWEVER, SUCH A STRATEGY DEMANDS INFOR MATION THAT IS HARDLY AVAILABLE. VIRTUAL PORTFOLIOS CAN BRIDGE THIS GAP AND PROVIDE EMITTERS OF FINANCIAL PRODUCTS WITH KNOWLEDGE ABOUT THEIR CUSTOMERS AND THEIR COMPETITORS. THIS ARTICLE ILLUSTRATES THE INSIGHTS THAT VIRTUAL PORTFOLIOS CAN PROVIDE TO EMITTERS OF A MUTUAL FUND.
THE PRICE-TO-EARNINGS (P/E) RATIO IS ONE OF THE MOST IMPORTANT METRICS FOR VALUING FIRMS. UNFORTUNATELY, INTERPRETATIONS OF HIGH-GROWTH FIRMS’ P/E RATIOS CAN BE CHALLENGING, BECAUSE THEY FREQUENTLY EXHIBIT EITHER EXTREMELY HIGH OR NEGATIVE VALUES. WE SHOW THAT THE USE OF CUSTOMER METRICS ALLOWS FOR BETTER INTERPRETING THESE P/E RATIOS, THAT IMPROVEMENTS IN CUSTOMER METRICS HAVE NON-INTUITIVE AND SURPRISING EFFECTS ON THE P/E RATIO, AND THAT OUR NEW MODEL BETTER PREDICTS FUTURE P/E RATIOS THAN EXISTING MODELS.
STUDIES HAVE FOCUSED ON INNOVATIONS IN VARIOUS CONTEXTS BUT LARGELY EXCLUDED FINANCIAL INNOVATIONS, DESPITE THEIR NOTABLE IMPORTANCE. THIS STUDY ANALYZES THE TYPES OF FINANCIAL INNOVATIONS BY MAJOR BANKS AND THEIR PAYOFFS. THE RESULTS INDICATE THAT SECURITY AND CREDIT INSTRUMENTS CONSTITUTE THE MOST COMMON FINANCIAL INNOVATIONS. THE AVERAGE RETURNS TO A FINANCIAL INNOVATION ARE $146 MILLION. IN ADDITION, RADICALNESS AND FINANCIAL RISKINESS INCREASE THE RETURNS, WHEREAS COMPLEXITY DECREASES THEM.
This research examines the impact of online display advertising and paid search advertising relative to offline advertising on firm performance and firm value. Using proprietary data on annualized advertising expenditures for 1651 firms spanning seven years, we document that both display advertising and paid search advertising exhibit positive effects on firm performance (measured by sales) and firm value (measured by Tobin's q). Paid search advertising has a more positive effect on sales than offline advertising, consistent with paid search being closest to the actual purchase decision and having enhanced targeting abilities. Display advertising exhibits a relatively more positive effect on Tobin's q than offline advertising, consistent with its long-term effects. The findings suggest heterogeneous economic benefits across different types of advertising, with direct implications for managers in analyzing advertising effectiveness and external stakeholders in assessing firm performance.
Nowadays, firms lack information to derive the share of wallet, a vital metric that identifies how much additional spending a firm could capture from each customer. However, decoding Blockchain data enables observing all transactions of each wallet, respectively customer, on the Ethereum NFT market. To shed light on the share of wallet, we analyzed 22.7 million transactions from over 1.3 million customers across eight competing firms on the Ethereum NFT market.
IN THE PAST YEARS THE CUSTOMER FEEDBACK METRIC RECOMMENDATION INTENTION HAS GAINED IMPORTANCE, ESPECIALLY DUE TO THE WIDESPREAD CONCEPT NET PROMOTER SCORE (NPS). THE NPS CONCEPT IMPLIES A POSITIVE, NON-LINEAR RELATIONSHIP BETWEEN RECOMMENDATION INTENTION AND CUSTOMER VALUE. THIS ARTICLE INVESTIGATES THE RELATIONSHIP BETWEEN RECOMMENDATION INTENTION OF INDIVIDUAL CUSTOMERS AND THEIR VALUE FOR THE FIRM. THE RESULTS SHOW THAT RECOMMENDATION INTENTION SIGNIFICANTLY INCREASES CONTRIBUTION MARGIN BUT NEITHER RETENTION NOR CUSTOMER VALUE. THE METRIC SATISFACTION HAS A SIGNIFICANT, POSITIVE IMPACT ON CUSTOMER VALUE AND CAN THUS BE USED AS A LEADING INDICATOR. THEREFORE, THE RESULTS DO NOT CONFIRM THE SUPERIORITY OF THE NPS CONCEPT FOR CUSTOMER MANAGEMENT.
ON THE INTERNET, SEARCH ENGINES INFLUENCE THE BEHAVIOR OF AN INCREASING PART OF CUSTOMERS. BANKS MAKE USE OF SEARCH ENGINES TO PROMOTE PRODUCTS BY USING KEYWORD AUCTIONS TO PURCHASE A PLACE OF THEIR ADVERTISEMENTS IN THE SPONSORED SEARCH LISTINGS. WE DESCRIBE HOW TO BID IN KEYWORD AUCTIONS AND HOW TO MEASURE THE SUCCESS OF SEARCHENGINE MARKETING.