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Study on the Determinants of Advertising Expenditures
Date Issued
2015
Date
2015
Author(s)
Hsueh, Yu-Ting
Abstract
This study examines the determinants of advertising expenditures. Advertising is the most important tool in the marketing of products and services; the spending on advertising is considered to be a profitable investment that reaps profits both in the long and short run. Nevertheless, the level of spending on advertising differs between companies. First, I summarize the outcomes of related research which study on the determinants of advertising expenditures from three perspectives: financial resources, competition and economy. Second, I hypothesize that advertising expenditures are positively associated with gross profit ratio and being a best global brand. In addition, I hypothesize that the relation between advertising expenditures and company-specific factors is affected by economic growth. I find that advertising expenditures are positively associated with gross profit ratio and being a best global brand. However, with respect to interactive variables, I find that only the relation between advertising expenditures and free cash flow, financial leverage and gross profit ratio are affected by economic growth. These results may suggest that these variables are more sensitive to economic fluctuation. Finally, in the subsample analysis, I find that the result of high advertising intensity sample is consistent with that of whole sample, suggesting that the results are not sensitive to an alternative restriction on sample.
Subjects
advertising spending
determinants
SDGs
Type
thesis