Shah, Syed Zulfiqar Ali and Akbar, Saeed (2008) Value relevance of advertising expenditure : a review of the literature. International Journal of Management Reviews, Vol.10 (No.4). pp. 301-325. ISSN 1460-8545

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Abstract

This paper presents a review of the relevant empirical literature on advertising value relevance. The current dominant accounting practice is to treat advertising as a current period expense. There has been growing evidence, however, to suggest that advertising should be viewed as an investment in long-term brand equity. While the primary focus is on the valuation studies of advertising expenditure, the paper also provides an overview of various other studies that relate advertising to profitability or sales of the firm or industry to investigate the effects of advertising expenditure. As a consequence, it is emphasized that there has been a recent shift to the use of valuation models in exploring the nature of advertising expenditure. Since market value captures both the current and future profitability effects of advertising, valuation models are often seen as a better alternative in exploring the intangible nature of advertising expenditure. It is found that the bulk of evidence on advertising value relevance comes from the US, where there has historically been greater disclosure of advertising expenditure. There appears to be little evidence on this matter in the UK, however. This may largely be attributed to the lack of advertising data availability in the UK.

Item Type:	Journal Item
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:	Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH):	Advertising -- Costs -- Research
Journal or Publication Title:	International Journal of Management Reviews
Publisher:	Blackwell Publishing
ISSN:	1460-8545
Date:	December 2008
Volume:	Vol.10
Number:	No.4
Number of Pages:	25
Page Range:	pp. 301-325
Identification Number:	10.1111/j.1468-2370.2007.00228.x
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/28977

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