Paul Sergius Koku

The Financial Impact of Boycotts and Threats of Boycott

Abstract The impact of actual boycotts and threats of boycott on the value of target firms was analyzed using the event study methodology. The results are counter-intuitive. The value of target firms increased, on average, by 0.76% on the day that news of the boycott became public. On the other hand, the value of the target firms increased by only 0.55% on the day that information of the threat of boycott became public. However, there is no significant statistical difference between the markets reaction to actual boycott and threats of boycott. When combined, without distinction between actual boycotts and threats of boycott, the value of target firms increased, on average, by 0.66%. The results also show that the market does not react differently to whether boycotts/threats are union sponsored or non-union sponsored.

The Effect of New Product Announcements and Preannouncements on Stock Price

Previous event studies which deal with new products do notdistinguish between preannouncements (made in advance of a new productintroduction into the marketplace) and new product announcements (made closeto the time when the new product is introduced). Methodologically, eventstudies implicitly assume that information is homogeneous; that is, they donot consider the amount of information contained in the news release or thetype (e.g., whether detailed or not). This paper argues that new productevent studies should distinguish between announcements and preannouncementsbecause both types of information release events (IRE) are strategicallydistinct and convey different information signals to the marketplace.Methodologically, event studies should allow for informationalheterogeneity. We analyze a large sample of IREs from the 1980–1989period for firms whose stock is publicly traded, distinguishing betweenpreannouncements and announcements. We use content analysis to classify IREsaccording to the type and amount of information provided. The results showthat it is incorrect to jointly analyze announcements and preannouncements.On average, only preannouncements have a significant positive effect onstock prices. However, the signaling effect of preannouncements on stockprice is industry-specific. In particular, the results support Klein andLeffler‘s theory (1981) that preannouncements in the manufacturing industryare effective strategic tools. We also investigate the impact of IREs onthe market risk (i.e., the risk that stockholders cannot diversify away) ofthe announcing and preannouncing firms. The results show that firm-specificand informational variables do not have any effect on market risk,regardless of the type of IRE (i.e., announcement or preannouncement).

Corporate name change signaling in the services industry

Investigates the effectiveness of corporate name change signaling in the services industry. Argues that previous studies on the subject are lacking because they failed to distinguish between the services and manufacturing sectors. Uses the trend analysis method and examines the movement of price‐earning ratios during a five‐year period before and after the name change. Evaluates the effectiveness of the name change signaling strategy by testing the difference in means of the “before and after” P/E ratios. Finds that firms who announce name change together with other managerial decisions and regularly release news on other firm‐specific activities fared much better than firms which did not release such information.

On the effectiveness of consumer boycotts organized through the internet: the market model

Purpose – The purpose of this study is to examine the effectiveness of consumer boycotts, which have been launched by individuals using the internet, in inflicting economic harm on the targeted firms.Design/methodology/approach – The paper uses the event study technique to analyze the markets response to consumer boycotts launched by individuals using the internet.Findings – The results show that consumer boycotts launched by individuals on the internet are ineffective in inflicting economic harm on the targeted firm.Research limitations/implications – Despites the buzz about the “dark side” of marketing using the internet, the stock market does not react significantly to boycotts launched by individuals using the internet. However, the small sample size of 63 events tampers the temptation to generalize the findings. Future studies can be conducted with a larger sample size with a different time horizon for a deeper understanding.Practical implications – In spite of the findings of this study, managers s...

Towards an Integrated Marketing Strategy for Developing Markets

The world has, during the past three decades, witnessed dramatic changes in the geopolitical landscape that have expanded international trade. Much of academic research during this period focused on such issues as whether global companies should standardize, adapt, and/or the degree to which they should adapt their marketing strategies to international markets. This study takes a different approach; instead of adapting firm-specific factors to the environment that firms encounter in developing markets, it focuses on how global companies can improve the infrastructure, the level of education, and the legal systems in order to improve the standard of living in developing countries while expanding markets.

On bizarreness in the entertainment industry

Examines the use of the bizarre or the outrageous in the entertainment industry as a promotion strategy, and specifically the propensity of rock/pop artistes to engage in bizarre or outrageous acts or conduct. Provides a brief survey of the practice. Next, using economic theories of human behavior to maximize expected utility and minimize transaction and learning costs, shows that what may appear as a thoughtless act or outrageous behavior by an artiste could in fact be a well‐thought‐out promotion strategy with valid economic underpinnings designed to promote the artiste. Such acts do not only confer uniqueness on the individual artiste, but are also useful in reducing the learning and transaction costs incurred by fans, and hence beneficial to both the artistes and the consumers. Suggests some less controversial but effective strategies for promoting artistes.

Financial exclusion of the poor: a literature review

Purpose – The purpose of this paper is to conduct a cross-disciplinary review of the literature on financial exclusion in order to provide a place where one could have a bird’s eye view of the academic activities that have been happening in the area. Design/methodology/approach – As a literature review, no specific methodology is required. Findings – Researchers in economic geography and urbanization seem to have contributed significantly to the growing literature on financial exclusion. The persistence of the problem despite efforts to combat it calls for innovative thinking on the part of marketing scholars and financial institutions on how to serve the unbanked. Research limitations/implications – The review identifies gaps in the state of current research and provides direction for future research. Practical implications – The study identifies gaps in the literature and provides directions for future research. Social implications – As a literature review, there is only an indirect social implications ...

Where do we go from here? Towards a theory in Islamic marketing

Purpose – The purpose of this study is to argues for theory development in Islamic marketing and attempts to lay the ground work by drawing on other social sciences. Design/methodology/approach – This paper is based on a critical review of the literature for insights that advance Islamic marketing. Findings – The study suggests that scholars in the area of Islamic marketing should start working towards the development of a theory of Islamic marketing. While this theory will draw on the unique engagement of Muslims with non-Muslims, it will offer an opportunity to explain and predict the world around us. Research limitations/implications – This is purely a theoretical piece that is aimed at knowledge development in the field, and, as such, it does not give much guidance to the practitioner, instead in invites other academics to draw on the world around us as they engage in their scholarly activities towards theory building. Practical implications – The study gives directions for areas of possible future re...

Price signaling: does it ever work?

Alpert et al.′s (1993) study on the relationship between objective product quality and price is both interesting and important. It continues the tradition of “borrowing” relevant theories from other disciplines to explicate problems faced in marketing. However, some issues raised regarding price signaling and quality need to be discussed further. In addition to information asymmetry, other conditions are necessary to ensure signaling equilibrium. A signal must be both information revealing and such that it cannot be mimicked. These conditions are, however, absent in the Alpert et al. (1993) study, leading to the conclusion price, as cited in the study, was not a signal of quality, rather it was an important strategic tool. Hence, the important lessons from the study are: we must exercise caution when “borrowing” theories from other disciplines to explicate marketing problems; and we are reminded that for a marketing strategy to be effective and successful, it is essential that the strategic elements be co...

On the connection between R&D, selling expenditures, and profitability in the pharmaceutical industry revisited

This paper extends P.S. Koku (2010, R&D expenditure and profitability in the pharmaceutical industry in the United States, Journal of Applied Managerial Accounting Research, 8, 36–43) in three important ways: (1) it expands selling expenses to include sales promotion and advertising expenses; (2) it examines media coverage as an additional explanatory variable of the stock markets reaction; (3) it more than doubles the sampling period which includes January 1980 through December 2001 instead of 1980 through 1989 in Koku (2010). The results confirm Koku (2010) and show that the market does not react significantly to information on innovations or innovative activities in the pharmaceutical industry (average abnormal returns are − 0.0064 with a t-value of − 0.2201). Furthermore, there is no relationship between excess abnormal returns and annual R&D budgets (coefficient is − 0.0010 with a t-value of − 1.02), and excess abnormal returns and annual advertising budgets (coefficient is 0.0001 with a t-value of 0.44). However, there is a significant relationship between the markets reaction and media coverage (coefficient is 0.00002 with a t-value of 2.17). This relationship has important managerial implications with regard to the content of new product information that managers in the industry release to the media.