Marketing decision makers are increasingly aware of the
importance of shareholder value maximization, which
calls for an evaluation of the long-term effects of
their actions on product-market response and investor
response. However, the marketing literature to date has
focused on the sales or profit response of marketing
actions, and the goals of marketing have traditionally
been formulated from a customer perspective. Recently,
there have been a few studies of the long-term investor
response to marketing actions. The current research
investigates one important aspect of this impact, the
long-term relationship between advertising spending and
market capitalization. The authors hypothesize that
advertising can have a direct effect on valuation (i.e.,
an effect beyond its indirect effect through sales
revenue and profit response). The empirical results
across two industries provide support for the hypothesis
that advertising spending has a positive, long-term
impact on own firms’ market capitalization and may have
a negative impact on the valuation of a competitor of
comparable size. The authors quantify the magnitude of
this investor response effect for and discuss its
implications for further research. pdf 2010
