Deceptive advertising and abnormal stock returns: An event study analysis
Jaeseok Jeong
Kung Hee University
Chan Yun Yoo
University of Kentucky
Introduction
It stands to reason that rational, ethical companies will avoid engaging in deceptive advertising. Deceptive advertising would expose the company to the risk of Federal Trade Commission (FTC) charges and the resultant negative publicity, wasted ad expenses, legal fees, restrictions on future ads, and degradation of company and brand image. Deceptive ads, whether created intentionally or unintentionally, may lead to an undeserved improvement in consumers’ impression of the product.
When the FTC prosecutes a company for deceptive advertising,...