The Impact of Advertisement Expenses on Profitability of Food and Personal Care Products Companies in Pakistan

Document Type: Original Research

Author

Centre for Management and Commerce, University of Swat, Khyber Pakhtunkhwa, Pakistan

Abstract

This research examined impact of advertisement expenses on profitability of Food and personal care product firms listed in Pakistan Stock Exchange. 10 years data were gathered from consolidated annual financial statements of nine companies over a period of 2009 to 2018. The profitability was measured by Return on Assets. Advertising expenses was independent. The regression model was used and the data were analyzed through SPSS software. It was concluded that advertisement expenses has a significant positive impact on profitability.

Keywords


Acar, M., & Temiz, H. (2017). Advertising effectiveness on financial performance of banking sector: Turkey case. International Journal of Bank Marketing, 35(4), 649-661.
Adeyeye, T. C., & Akanbi, P. A. (2011). The association between advertising and sales volume: a case study of Nigerian Bottling Company Plc. Journal of Emerging Trends in Economics and Management Sciences, 2(2), 117-123.
Agbeja, O., Adelakun, O., & Akinyemi, D. (2015). Analysis of the Effect of Advertising on Sales and Profitability of Company. International Journal of Novel Research in Marketing Management and Economics, 2(3), 81-90.
Al-Nimer, M., & Yousef, A. A. (2015). The impact of marketing strategy on profitability in medical Jordanian corporations. International Business Research, 8(11), 61.
Assaf, A. G., Josiassen, A., Mattila, A. S., & Cvelbar, L. K. (2015). Does advertising spending improve sales performance? International Journal of Hospitality Management, 48, 161-166.
Aworemi, J., Oyedokun, J., Ajagbe, F., & Wojuade, C. (2008). Impact of Advertising, Sales Promotion, Publicity and Public Relations on the Performance of Niger State Transport Authority.”. Pakistan Journal of Social Sciences, 5(2), 182-186.
Chen, M.-H. (2015). Cyclical effects of advertising on hotel sales, risk and return. International Journal of Hospitality Management, 46, 169-179.
Eng, L. L., & Keh, H. T. (2007). The effects of advertising and brand value on future operating and market performance. Journal of Advertising, 36(4), 91-100.
Gisser, M. (1991). Advertising, concentration and profitability in manufacturing. Economic Inquiry, 29(1), 148-165.
Hameed, F. (2013). The effect of advertising spending on brand loyalty mediated by store image, perceived quality and customer satisfaction: A case of hypermarkets. Asian Journal of Business Management, 5(1), 181-192.
Hirschey, M. (1982). Advertising and the profitability of leading and following firms. Managerial and Decision Economics, 3(2), 79-84.
Hirschey, M. J. (1978). Television advertising and profitability. Economics Letters, 1(3), 259-264.
Hossain, M., & Islam, T. (2019). Effect of Advertising Expenses and Sales Incentives on Financial Performance: Dissecting the Cases of Two Market Leaders. Business and Economic Research, 9(1), 69-83.
Hsu, L.-T. J., & Jang, S. S. (2008). Advertising expenditure, intangible value and risk: A study of restaurant companies. International Journal of Hospitality Management, 27(2), 259-267.
Israeli, A. A., Adler, N., Mehrez, A., & Sundali, J. A. (2000). Investigating the use of advertising for communicating a hotel's strategic assets. Journal of Hospitality & Leisure Marketing, 7(3), 23-37.
Jindal, N. K. (2015). Essays on marketing's impact on financial performance.  
Joshi, A., & Hanssens, D. M. (2010). The direct and indirect effects of advertising spending on firm value. Journal of marketing, 74(1), 20-33.
Kim, J., Jun, J., Tang, L., & Zheng, T. (2018). The Behavioral and Intermediate Effects of Advertising on Firm Performance: An Empirical Investigation of the Restaurant Industry. Journal of Hospitality & Tourism Research, 42(2), 319-337.
Leach, D. F., & Duncan Reekie, W. (1996). A natural experiment of the effect of advertising on sales: the SASOL case. Applied Economics, 28(9), 1081-1091.
Markota, L., Aljinović Barać, Ž., & Knezović, V. (2015). Impact of Promotional Costs on Company’S Profitability. Journal Of Accounting and Management(2), 19-30.
Meyer, H. M., & Ujah, N. U. (2017). Managed earnings: the negative impact of marketer’s discretionary advertising expenditures on firm performance. Marketing Intelligence & Planning, 35(2), 192-204.
Notta, O., & Oustapassidis, K. (2001). Profitability and media advertising in Greek food manufacturing industries. Review of industrial organization, 18(1), 115-126.
Park, K., & Jang, S. S. (2012). Duration of advertising effect: Considering franchising in the restaurant industry. International Journal of Hospitality Management, 31(1), 257-265.
Riaz, S., Furqan, M., & Siddique, S. (2015). Advertising Influence on the Profitability of Public and Private Sector Commercial Banks.
Sadraei, J. A., Zabihidan, M., & Balaghi, A. (2011). An investigation on the effects of advertising and industrial concentration on profitability in Iranian food products and beverages.
Sahay, A., & Pillai, A. (2009). Differential impact of advertising and distribution expenditure on Tobin's Q: A perspective from listed firms in India. Journal of Indian Business Research, 1(2/3), 77-94.
Sharma, J. K., & Husain, S. (2015). Marketing Expenses & Profitability: Evidence from Telecom Sector in Kingdom of Saudi Arabia. Marketing, 7(35).
Singh, S., Sharma, G. D., & Mahendru, M. (2011). Causal Effect of Advertisement on Profit and Sales. Available at SSRN 1905424.