Interdepartmental Seminar:"Disclosure of Advertising Expenditure: An Indicator of Business Strategy"
Speaker(s): Leigh McAlister - McCombs School of Business, Univ. of Texas, Austin
Date & Time: May 3, 2013 12:30 PM - 2 PM (Eastern)
11119 Bellflower Road
Cleveland, OH 44106-7235
Title of Seminar: "Disclosure of Advertising Expenditure: An Indicator of Business Strategy"
Past research shows that, for the set of firms that disclose advertising expenditure, year-to-year changes in the level of a firm’s advertising expenditure influence year-to-year changes in the firm’s stock market value. Those findings are consistent with the Securities and Exchange Commission’s requirement that a firm that believes advertising to influence firm value (i.e., believes advertising to be “material”) must disclose that advertising expenditure. Building from past literature, we expand the sample from firms that disclose advertising to all firms and we shift consideration from the impact of a firm’s year-to-year changes in advertising expenditure to the impact of a firm’s enduring belief about advertising’s ability to influence firm value. In particular, we ask whether firms that believe advertising influences firm value perform better than firms that do not. Based on the assumption that a believing firm will have intangible, market-based assets, we hypothesize that such a firm will be more profitable, have higher firm value, and be more likely to include a marketing executive on its top management team. Findings from financial archive data on publicly traded US firms between 1996 and 2009 support the hypotheses. Further, the results of a natural quasi-experiment related to accounting standard change in 1994 (FRR44) confirm that the profitability and firm value advantages are not merely the result of spending on advertising. Rather, these advantages arise only if the firm believes that its advertising influences its stock market value..
About the Speaker: Professor Leigh McAlister is the Ed and Molly Smith Chair in the Department of Marketing. Leigh’s research and professional activities have, for a long time, addressed issues at the intersection of marketing knowledge development and marketing practice. She won the 2003 O’Dell Award for the most impactful paper published in Journal of Marketing Research in 1998, the 2005 and 2011 Davidson Prizes for the best paper in Journal of Retailing and she was a finalist for the 2007 MSI/H. Paul Root Award for the Journal of Marketing Paper with the most impact on practice. During 2003-2005, Prof. McAlister was also the Executive Director of the Marketing Science Institute (MSI), a non-profit organization dedicated to bridging the gap between marketing theory and business practice.