Publication Type
Journal Article
Version
acceptedVersion
Publication Date
5-2023
Abstract
Publicly listed firms have the discretion to disclose (or not) advertising spending in their annual (10-K) reports. The disclosure of advertising spending can provide valuable information because advertising is a leading indicator of future performance. However, estimates of advertising spending are available from data providers, arguably mitigating the need for its formal disclosure. This study argues that firms’ disclosure of advertising spending provides more complete and public information and therefore lowers investor uncertainty about future firm performance (idiosyncratic risk). Empirical analyses show this effect is largely driven by the negative effect of disclosure of advertising spending on analyst uncertainty. Consistent with agency theory, the negative effect of the disclosure of advertising spending on analyst uncertainty is stronger for firms with more financial resources, lower disclosure quality, and that are in more competitive industries. Additional analyses show that the disclosure of advertising spending has a significant positive effect on firm value in specific sectors. These results, therefore, identify an avenue for Chief Marketing Officers to play a greater role in managing investor relations. In addition, they suggest strong merit for the Securities and Exchange Commission and the Financial Accounting Standards Board to reconsider current regulations governing advertising spending disclosure.
Keywords
Disclosure, advertising spending disclosure, advertising, marketing information, marketing-finance interface
Discipline
Advertising and Promotion Management | Corporate Finance | Marketing
Research Areas
Marketing
Publication
Journal of Marketing
Volume
87
Issue
3
First Page
359
Last Page
382
ISSN
0022-2429
Identifier
10.1177/00222429221123013
Publisher
SAGE Publications (UK and US)
Citation
MOON, Sungkyun; TULI, Kapil R.; and MUKHERJEE, Anirban.
Does disclosure of advertising spending help investors and analysts?. (2023). Journal of Marketing. 87, (3), 359-382.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7136
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1177/00222429221123013
Included in
Advertising and Promotion Management Commons, Corporate Finance Commons, Marketing Commons