Impact of advertising expenditure on firm performance: Evidence from listed companies of Pakistan

Hammad Hassan Mirza, Haroon Hussain () and Warda Gull ()
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Hammad Hassan Mirza: Noon Business School, University of Sargodha, Pakistan
Haroon Hussain: Noon Business School, University of Sargodha, Pakistan
Warda Gull: Commerce Department, Govt. Graduate College for Women, Sargodha, Pakistan

International Journal of Financial Engineering (IJFE), 2022, vol. 09, issue 03, 1-14

Abstract: The primary focus of this study is to investigate the impact of advertising expenditure on firm performance. In light of the existing literature, this study considers four proxies of firm performance i.e., Sales (SLS), Return on Assets (ROA), Market-to-Book Ratio (MBR) and Market Capitalization (MC). The sample data for the purpose of estimation consists of 100 listed companies selected randomly from Pakistan Stock Exchange (PSX) during 2005–2018. The results show that advertising spending has a significantly positive impact on firm’s performance. This is also true for lagged value of advertising, where the results show significant positive relationship of lagged advertising on firm performance. This study supports the signaling effect of advertising expenditure on performance of Pakistani firms.

Keywords: Advertising expenditure; firm value; firm performance; signaling theory (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S2424786322500128

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