The Differential Effect of New Product Preannouncements in Driving Institutional and Individual Investor Ownership
Document Type
Article
Publication Date
6-6-2022
Abstract
Firms often use new product preannouncements (NPPAs) to attract investors and inform them about innovative offerings in the pipeline. We observe that the appeal of an NPPA differs for retail and institutional investors. Utilizing prospect theory, we argue that the two types of investors face unequal levels of uncertainty and are dissimilarly loss averse due to varying levels of knowledge and access to resources. This results in varying attitudes towards investment horizon, risk-taking, and preference for information sources. We find investor proclivity toward an NPPA depends on several factors, including the short-term abnormal return, the valence of coverage in media and analyst reports, the firm's risk profile, and the exploration emphasis of the firm. Moreover, we show that higher levels of institutional ownership ultimately contribute to new product success. The results hold implications for strategies that managers can employ to increase investor ownership within the firm to fund innovation.
Publication Title
Journal of Business Research
Volume
149
First Page
811
Last Page
823
Digital Object Identifier (DOI)
https://doi.org/10.1016/j.jbusres.2022.05.080
Citation Information
Sardashti, Hanieh and Bhattacharya, Abhi, "The Differential Effect of New Product Preannouncements in Driving Institutional and Individual Investor Ownership" (2022). UNF Faculty Research and Scholarship. 3245.
https://digitalcommons.unf.edu/unf_faculty_publications/3245
