Close window

ASSET VALUE OF UK FIRMS ADVERTISING EXPENDITURES

Maqsood Iqbal Qureshi

ATCO Power, Canada.

 

ABSTRACT

This paper empirically investigates the relationship between advertising expenditures and the market value of firms using a valuation model and a sample of UK firms for the period between 1998 and 2003. The research findings indicate that advertising expenditures are significantly associated with increases in market value, suggesting that capitalizing advertising expenditures is appropriate. These results improve our understanding of the gap between the market value and book value of firms by focusing on intangible assets (R&D and advertising), which do not appear on financial statements. One of the major contributions of this study is that it adds to the very limited research available on intangibles in the UK. All in all, this paper should help to improve the understanding of the role that advertising investments play in firm valuation in the UK market. This paper provides useful guidance to standard setters on accounting for such intangible investments

Key words; Advertising, Intangibles, Market Value, Valuation, and Capitalization

GEL Codes: M, M4, M41.