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.