The effects of advertising and publicity on corporate reputation and sales revenue: 1985-2005

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2007

Authors

Kim, Kyung-ran

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With the increasing call for accountability of significant marketing communication spending, quantifying and measuring the contribution of marketing communication to market performance is increasingly a requirement for sustainability in all management practices. In addition, the resource-based view (RBV) suggests that a firm's marketing communication creates intangible market-based assets and that these assets strengthen a firm's market and financial performance. Recent developments of the market-based assets theory focus on corporate reputation as an intangible market-based asset, suggesting that a favorable reputation is an intangible asset that increases a firm's performance. This study examined the effect of advertising and publicity on corporate reputation and market performance and hypothesized that a firm's advertising and publicity generated favorable corporate reputations and high levels of sales revenues in certain firms. Hypotheses were tested by a time-series analysis using the panel data of 18 companies over a 21-year period from 1985 to 2005. The results indicated that advertising and publicity have significant effects on corporate reputation for certain companies. Other variables, such as a firm's dividend yield to investors, market value, diversification, and profitability were significantly related to assessments of corporate reputation for certain companies, but the direction of the relationship varied from company to company. For example, as expected, low dividend yields induce high assessments of corporate reputation for certain companies. A firm's current market value also affects assessments of a firm's reputation. More diversified companies yield lower corporate reputations for certain companies. Regarding the relationship between marketing communication and sales revenues, advertising and publicity have significant effects on sales revenues for some companies. A firm's R&D expenditures, the focus of the firm, and firm size also showed a significant positive relevance to sales revenues for certain companies.

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