| Abstract: |
In this study, we quantify the effects of receiving stocks from certain brands
on spending in the brand's stores. We use data from a new FinTech company
called Bumped that opens brokerage accounts for its users and rewards them
with stocks when they shop at previously elected stores. For identification,
we use 1) the staggered distribution of brokerage accounts over time after
individuals sign up for a waitlist and 2) randomly distributed stock grants.
We find that individuals spend 40% more per week at elected brands and stores
after being allocated an account. In response to receiving a stock grant,
individuals increase their weekly spending by 100% on the granted brands.
Beyond documenting a causal link between stock ownership and individual
spending, we show that weekly spending in certain brands of our users is
strongly correlated with stock holdings of that brand by Robinhood brokerage
clients. Finally, we present survey evidence to argue that loyalty is the
dominant psychological mechanism explaining our findings. We thus provide
micro evidence for the idea that stock ownership drives brand loyalty, which
is an intangible asset that leads to lower firm cash flow volatility. |