Shareholder complaints put pressure on publicly-listed firms, yet firms rarely directly improve the actual issues raised in these complaints. We examine whether firms respond in an alternative way by altering advertising investments in an effort to ward off the financial damage associated with shareholder complaints. By analyzing a unique data set of shareholder complaints submitted to S&P 1500 firms between 2001 and 2016, supplemented with qualitative interviews of executives of publicly-listed firms, we document that firms increase advertising investments following shareholder complaints and that such an advertising investment response mitigates a post-complaint decline in firm value. Furthermore, results suggest that firms are more likely to increase advertising investments when shareholder complaints are submitted by institutional investors, pertain to nonfinancial concerns, and relate to topics that receive high media attention. The findings provide new insights on how firms address stock market adversities with advertising investments and inform managers about the effectiveness of such a response.

1. From:From:
 Shareholders unsatisfied with managers’ decisions can file formal complaints,
registered as shareholder proposals at the firm’s Annual General Meeting
 Shareholder complaints publicly point out perceived shortcomings in strategy and
management, often also relate to marketing topics, and seriously threaten firm value
 Typically, firms do not change issues criticized by shareholders
 Instead, they alter their advertising investments to secure demand for their stock
What are shareholder complaints and
why relevant to marketing?
Wies et al. (2019)
Complaint about no reporting on gene-
engineered plants

2. From:From:
 Effect: Following shareholder complaints, firms increase advertising investments to
manage investor perceptions upwards and improve investor demand (”advertising
investment response”)
 Extent: Advertising investment response to shareholder complaints is stronger if
complaints are more salient
 Salience: Complaints are submitted by powerful institutional investors, have broader legitimacy by
relating to nonfinancial stakeholder concerns, or are more urgent by receiving larger media attention
 Effectiveness: Advertising investment response to shareholder complaints mitigates
the negative impact of shareholder complaints on intangible firm value (Tobin’s q)
 Data: Results obtained from studying shareholder complaints submitted to S&P 1500
firms between 2001-2016
Advertising investment response to
shareholder complaints
Wies et al. (2019)

3. From:From:
 Although an advertising investment response to shareholder complaints
is effective in protecting firm value, our analysis shows that most firms
do not increase advertising investments sufficiently
 Only if shareholder complaints are more salient, firms increase
advertising investments close to an optimal level
Firms increase advertising investments—
but not enough!
Wies et al. (2019)
Shareholder
complaintsalience
Proportion of firms changing advertising investments in year after receiving shareholder complaints: