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

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.

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Notes

  1. Industry titles of these SIC codes: SIC2842 Specialty Cleaning, Polishing and Sanitation Preparations; SIC3571 Electronic Computers; SIC3845 Electromedical and Electrotherapeutic Apparatus; SIC5731 Retail-Radio, TV and Consumer Electronics Stores; SIC7370 Services-Computer Programming, Data Processing, Etc.; SIC7380 Services-Miscellaneous Business Services.

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Correspondence to Fang Wang.

Additional information

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.

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Wang, F., Zhang, XP.(. & Ouyang, M. Does advertising create sustained firm value? The capitalization of brand intangible. J. of the Acad. Mark. Sci. 37, 130–143 (2009). https://doi.org/10.1007/s11747-008-0112-2

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  • DOI: https://doi.org/10.1007/s11747-008-0112-2

Keywords

  • Advertising
  • Brand equity
  • Tobin’s Q