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Showing posts from June, 2011

Why do B2B Firms use B2C Advertising Channels?

Do people really care whether the aircraft they are flying is manufactured by Boeing or Airbus? The type of aircraft is not even a criterion listed while choosing your flights on Orbitz or other flight booking websites. Then why does Boeing (NYSE:BA) spend so much money on television advertising?

Before you read any further let me admit that I don't know why! But I can certainly speculate. One of the possible reasons is that it creates awareness about the firm among the individual investors. Now that just raises more question. For example, why should firms care about the type of investors?

Grullon, Kanatas, and Weston (2004) proposed that advertising gets more individual investors who increase the stock's liquidity level—the ease of buying and selling the stock. We use a similar argument and show that individual investors also reduce liquidity risk—the changes in the liquidity level. There seems to be some benefit of having individual investors around. As both these papers sho…