Advertising and Firm Value : Mapping the Relationship between Advertising, Profitability and Business Strategy in India

With companies investing millions of rupees or dollars in marketing communication including advertising, it is but natural to examine its impact on the bottom line of the firm. With markets ruling the roost, practitioners and researchers have turned their attention towards examining the impact of marketing communication activities like advertising on firm valuations. Moreover, interest is rising in quantifying the impact of marketing activities on firm's profitability and value providing the framework for linkages between marketing, finance and strategy. This study focuses on studying these relationships by seeking to measure the impact of advertisement spending by firms on firm profitability and value as measured by the Q-ratio. A total of 172 firms are taken as the sample size and we find evidence that while the impact is significant in statistical terms, increased advertising has not been able to contribute conclusively in enhancing firm value