Advertisement Expenditure and Stock Returns: Evidence From India

Abstract

According to the efficient market hypothesis, a company's advertising expenditures are fully reflected in its stock price. If so, then future abnormal stock returns should not be correlated to advertising spending. Nonetheless, this chapter explores the impact of advertising spending on the abnormal stock returns using portfolio sort based on both the advertising intensity and change in advertising intensity. Using data from 2000 to 2019, the results suggest that larger advertising intensity is coupled with negative abnormal stock returns in India. The study suggests that market is penalizing the firms for spending more on advertising. Hence, it suggests that advertising budgets should be allocated with caution by marketing managers.

Citation

Mandleshwar, P. (2024), "Advertisement Expenditure and Stock Returns: Evidence From India", Sergi, B.S., Tiwari, A.K. and Nasreen, S. (Ed.) Modeling Economic Growth in Contemporary India (Entrepreneurship and Global Economic Growth), Emerald Publishing Limited, Leeds, pp. 215-231. https://doi.org/10.1108/978-1-80382-751-320241012