Does disclosure of advertising spending help investors and analysts?
Publicly listed firms have the discretion to disclose (or not) advertising spending in their annual (10-K) reports. The disclosure of advertising spending can provide valuable information because advertising is a leading indicator of future performance. However, estimates of advertising spending are...
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sg-smu-ink.lkcsb_research-81352023-05-31T02:33:04Z Does disclosure of advertising spending help investors and analysts? MOON, Sungkyun TULI, Kapil R. MUKHERJEE, Anirban Publicly listed firms have the discretion to disclose (or not) advertising spending in their annual (10-K) reports. The disclosure of advertising spending can provide valuable information because advertising is a leading indicator of future performance. However, estimates of advertising spending are available from data providers, arguably mitigating the need for its formal disclosure. This study argues that firms’ disclosure of advertising spending provides more complete and public information and therefore lowers investor uncertainty about future firm performance (idiosyncratic risk). Empirical analyses show this effect is largely driven by the negative effect of disclosure of advertising spending on analyst uncertainty. Consistent with agency theory, the negative effect of the disclosure of advertising spending on analyst uncertainty is stronger for firms with more financial resources, lower disclosure quality, and that are in more competitive industries. Additional analyses show that the disclosure of advertising spending has a significant positive effect on firm value in specific sectors. These results, therefore, identify an avenue for Chief Marketing Officers to play a greater role in managing investor relations. In addition, they suggest strong merit for the Securities and Exchange Commission and the Financial Accounting Standards Board to reconsider current regulations governing advertising spending disclosure. 2023-05-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/7136 info:doi/10.1177/00222429221123013 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8135/viewcontent/00222429221123013.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Disclosure advertising spending disclosure advertising marketing information marketing-finance interface Advertising and Promotion Management Corporate Finance Marketing |
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Disclosure advertising spending disclosure advertising marketing information marketing-finance interface Advertising and Promotion Management Corporate Finance Marketing MOON, Sungkyun TULI, Kapil R. MUKHERJEE, Anirban Does disclosure of advertising spending help investors and analysts? |
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Publicly listed firms have the discretion to disclose (or not) advertising spending in their annual (10-K) reports. The disclosure of advertising spending can provide valuable information because advertising is a leading indicator of future performance. However, estimates of advertising spending are available from data providers, arguably mitigating the need for its formal disclosure. This study argues that firms’ disclosure of advertising spending provides more complete and public information and therefore lowers investor uncertainty about future firm performance (idiosyncratic risk). Empirical analyses show this effect is largely driven by the negative effect of disclosure of advertising spending on analyst uncertainty. Consistent with agency theory, the negative effect of the disclosure of advertising spending on analyst uncertainty is stronger for firms with more financial resources, lower disclosure quality, and that are in more competitive industries. Additional analyses show that the disclosure of advertising spending has a significant positive effect on firm value in specific sectors. These results, therefore, identify an avenue for Chief Marketing Officers to play a greater role in managing investor relations. In addition, they suggest strong merit for the Securities and Exchange Commission and the Financial Accounting Standards Board to reconsider current regulations governing advertising spending disclosure. |
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text |
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MOON, Sungkyun TULI, Kapil R. MUKHERJEE, Anirban |
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MOON, Sungkyun TULI, Kapil R. MUKHERJEE, Anirban |
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MOON, Sungkyun |
title |
Does disclosure of advertising spending help investors and analysts? |
title_short |
Does disclosure of advertising spending help investors and analysts? |
title_full |
Does disclosure of advertising spending help investors and analysts? |
title_fullStr |
Does disclosure of advertising spending help investors and analysts? |
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Does disclosure of advertising spending help investors and analysts? |
title_sort |
does disclosure of advertising spending help investors and analysts? |
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Institutional Knowledge at Singapore Management University |
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2023 |
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https://ink.library.smu.edu.sg/lkcsb_research/7136 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8135/viewcontent/00222429221123013.pdf |
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