Firm valuation of advertising expense: An investigation of scaler effects

C. S.Agnes Cheng, Charles J.P. Chen

Research output: Journal article publicationJournal articleAcademic researchpeer-review

20 Citations (Scopus)


Previous research and logic indicate that capital markets generally value spending for advertising and promotion; however, empirical results from these studies are far from consistent. While most studies find a positive relationship between a firm’s advertising spending and its market value (Hirschey, 1985; Jose, Nichols and Stevens, 1986; Lustgarten and Thomadakis, 1987;Morck, Shleifer and Vishny, 1988; and Morck and Yeung, 1991), others find a negative relationship when control variables are added to the empirical model (Erickson and Jacobson, 1992). Differences in model specification may explain these conflicting results. Previous studies have included a variety of control variables such as return on investment, market share, research and development (R & D) spending, and book value (Erickson and Jacobson, 1992; Chauvin and Hirschey, 1993; Hirschey, 1982) when testing the relationship between promotional expenses and market value. Different firm characteristics (e.g. sales, total assets, book value of equity and price) have been selected as scalers for empirical measures of both the dependent and independent variables. Although these studies investigated an essentially identical theoretical relationship, variation in model specifications renders interpretations different.

Original languageEnglish
Pages (from-to)41-62
Number of pages22
JournalManagerial Finance
Issue number10
Publication statusPublished - 1 Jan 1997
Externally publishedYes

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Finance


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