TITLE

The Value-Relevance of Advertising: Evidence from Pharmaceutical Industry

AUTHOR(S)
FENG GU; LI, JOHN Q.
PUB. DATE
January 2010
SOURCE
Journal of Accounting, Auditing & Finance;Winter2010, Vol. 25 Issue 1, p85
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This study examines whether advertising by pharmaceutical firms is value relevant. The large amount of pharmaceutical advertising spending and its rapid growth in recent years raise important questions about the contribution of advertising to pharmaceutical firm value. Our evidence indicates that stock investors view advertising by pharmaceutical firms as a source of future economic benefits, consistent with the value-enhancing role of pharmaceutical advertising. Advertising expenditures of pharmaceutical firms have a greater association with the firm's stock prices and returns than those of nonpharmaceutical firms. We also find that advertising expenditures of pharmaceutical firms, similar to capitalized intangible assets but unlike fully expensed research and development (R&D) expenditures, are not significantly related to future earnings variability and uncertainty. This evidence suggests high reliability of future benefits associated with advertising in pharmaceutical industry. The high value relevance and reliability of pharmaceutical advertising have implications for the accounting treatment of this intangible expenditure (i.e., expensing vs. capitalization).
ACCESSION #
48376503

 

Related Articles

  • The Ad Market. Cardona, Mercedes M. // Advertising Age;9/23/2002, Vol. 73 Issue 38, p8 

    This article looks at the status of the advertising industry in the U.S. as of September 2002. New business activity kept improving in August 2002. forty-five accounts changed agencies in August 2002. The holding companies saw large accounts changing hands such as Hyundai's dealer association...

  • PepsiCo 'reset' shows promise a year in. Zmuda, Natalie // Advertising Age;2/18/2013, Vol. 84 Issue 7, p10 

    The article considers the impact on the finances of beverage industry company PepsiCo of its decision to increase its advertising spending in 2012, noting that although corporate profits declined for all of 2012, they increased by 17 percent in the fourth quarter of that year.

  • Performance of pharmaceutical companies on KSE. Haque, Ansarul // Economic Review (05318955);Jul98, Vol. 29 Issue 7, p19 

    Presents information depicting stock performance of pharmaceutical companies in Pakistan listed in the Karachi Stock Exchange in 1997. Sales; Pre-tax profits and earnings per share; Dividends; Outlook.

  • ASSESSING ADVERTISING EFFICIENCY. Pergelova, Albena; Prior, Diego; Rialp, Josep // Journal of Advertising;Fall2010, Vol. 39 Issue 3, p39 

    This research focuses on a major concern for marketers addressing the claims of inefficiency of spending on advertising. We examine whether the Internet can help increase overall advertising efficiency. Using a sample from the Spanish automobile industry, we combine a nonparametric method-Data...

  • Online media spend is as clear as mud. Burrowes, Tim // B&T Weekly;3/9/2007, Vol. 57 Issue 2602, p15 

    The author discusses the need for robust measurement system for tracking the effectiveness of online advertising. A method for measuring the return on investment in internet advertising is absent. A mention is made of the exclusion of online spending in billings of media agencies by Nielsen...

  • Explaining Variations in the Advertising & Promotional Costs/Sales Ratio: A Rejoinder. Ailawadi, Kusum; Farris, Paul; Parry, Mark // Journal of Marketing;Jan1997, Vol. 61 Issue 1, p93 

    In 1994, the authors (see Ailawadi, Farris, and Parry 1994) reported the results of a failed attempt to validate the findings of Balasubramanian and Kumar's (1990) empirical analysis of the determinants of the firm-level ratio of advertising and promotion to sales (A&P/S). Balasubramanian and...

  • Meaningless Measures. SCHULTZ, DON E. // Marketing News;Feb2014, Vol. 48 Issue 2, p20 

    The article looks at evaluation of marketing and advertising campaigns as of 2014, focusing on challenges related to measurements of their effectiveness. The author argues that some traditional measures such as number of exposures and return on investment are not useful, particularly in the...

  • Plugging Away. Moses, Lucia // MediaWeek;6/9/2008, Vol. 18 Issue 23, p5 

    The article focuses on the advertising industry in printed media. It explains that the printed advertising market has decreased and this has led to the increase of lower-quality advertisements being printed. The results of the lower-quality advertisements and the effect they have on magazines...

  • Sorry, John.  // MediaWeek;6/22/2009, Vol. 19 Issue 25, special section p1 

    The authors offer opinions on advertising effectiveness and advertising research. A statement by 19th century department store owner John Wanamaker that half of all advertising spending was wasted, but he didn't know which half is said to be as valid in the 21st century as it was in Wanamaker's...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics