, Volume 37, Issue 2, pp 130-143
Date: 07 Aug 2008

Does advertising create sustained firm value? The capitalization of brand intangible

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access

Abstract

This research inquires into the nature and degree of advertising effects on firm intangible values. Based on marketing research on consumer based brand equity, this paper challenges the prevailing decaying assumption employed in the accounting/finance disciplines to model the advertising-firm value relationship. Meanwhile, using financial data and methods, we provide new measures for the marketing discipline to evaluate the effectiveness of advertising to create brand intangible. Results indicate that advertising effects on firm intangible assets are sustainable and accumulative and support the asset/investment-like characteristics of advertising expenditures. The research provides an empirical method to assess long-term advertising performance and suggests firms’ varying effectiveness in creating brand equity through advertising. This study is the first to report negative persistence effects of advertising to firm intangible values.

This research is supported by the Social Sciences and Humanities Research Council of Canada, Grant No. 122551, and the Natural Sciences and Engineering Research Council of Canada, Grant No. RGPIN239031.