Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/30775
Title: Stock market reaction to unexpected growth in marketing expenditure : negative for sales force, contingent on spending level for advertising
Authors: Kim, M 
McAlister, LM
Keywords: Advertising
Analysts' forecasts
Cumulative abnormal stock returns
Firm value
Fundamental signals
Sales force
Issue Date: 2011
Publisher: American Marketing Association
Source: Journal of marketing, 2011, v. 75, no. 4, p. 68-85 How to cite?
Journal: Journal of marketing 
Abstract: Because firms do not publicly report marketing expenditures, most studies of the link between firm value and marketing consider advertising (which is publicly reported for many firms) a proxy for marketing. The authors extend those studies in two ways. First, they broaden the proxy for marketing by considering both advertising and sales force. Second, they offer an explanation for the fact that some studies linking advertising to firm value find a positive relationship, whereas others find a negative relationship. The accounting literature suggests that the link to firm value for both unexpected growth in sales force expenditures and unexpected growth in advertising expenditures should be negative. The authors confirm the hypothesized accounting relationship for sales force expenditures but find a contingent relationship for advertising expenditures. Firm value and unexpected growth in advertising expenditures are negatively related for firms that advertise below the advertising response threshold, but they are positively related for firms that advertise above that threshold. Perhaps because this contingent relationship is difficult for analysts to learn through observation of the stock market, analysts ignore value-relevant advertising expenditure information when they forecast firm value.
URI: http://hdl.handle.net/10397/30775
ISSN: 0022-2429
EISSN: 1547-7185
DOI: 10.1509/jmkg.75.4.68
Appears in Collections:Journal/Magazine Article

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