IS VALUE ASSOCIATED WITH INITIATING NEW ADVERTISING AGENCY-CLIENT RELATIONS

Citation
Lk. Mathur et I. Mathur, IS VALUE ASSOCIATED WITH INITIATING NEW ADVERTISING AGENCY-CLIENT RELATIONS, Journal of advertising, 25(3), 1996, pp. 1-12
Citations number
18
Categorie Soggetti
Business,Communication
Journal title
ISSN journal
00913367
Volume
25
Issue
3
Year of publication
1996
Pages
1 - 12
Database
ISI
SICI code
0091-3367(1996)25:3<1:IVAWIN>2.0.ZU;2-C
Abstract
A variety of factors motivate firms' managers to initiate new relation s with advertising agencies. Principal among the factors is the desire to improve the firm's financial performance. The authors examine whet her initiating new relations results in a change in the market value o f the firm, that is, whether there is a wealth effect. Three situation s involving new relations are studied a firm's announcement that a new account is established with an advertising agency, a firm's announcem ent that a new account is established with an agency already linked to the firm, and a firm's announcement that a new account is established for a new business activity by the Fm. One overall sample and three s ubsamples corresponding to the three situations were compiled for anal ysis. The results for the overall sample show significant negative wea lth effects associated with the announcements of new agency-client rel ations. Similarly, negative wealth effects are observed for the first subsample. However, significantly positive wealth effects are observed on a delayed basis for the second subsample (announcements of new acc ounts with agencies already linked to the firms) and for the third sub sample (announcements of new accounts for new activities). Announcemen ts associated with more prestigious agencies resulted in more positive wealth effects. Finally, announcements by firms with relatively poor financial performance were associated with relatively lower wealth eff ects. Possible managerial implications of the results are discussed.