Does Investing in Marketing Efforts Affect Firm Value and Profitability? An Application with Panel Data Analysis

Abstract

The purpose of this study is to examine the effect of investing in marketing efforts on profitability and firm value. The scope of the study consists of public companies listed in Borsa Istanbul Services Index (XUHIZ). The study covers 49 companies (196 firm-years) listed in XUHIZ in the period 2016-2019. As dependent variables, the accounting-based performance indicator "ROA" and the market-based performance indicator "Tobin's Q ratio" were used. Investment in marketing efforts was represented by independent variables as marketing intensity and marketing expenses to total operating expenses ratio. In the study, panel data analysis method, which allows both time series and cross-section, was chosen. According to the panel data analysis findings, it was determined that the increase in the ratio of investment in marketing efforts to sales did not have a positive effect on the market value or profitability of the company. On the other hand, it was found that the increase in the ratio of marketing expenses to total operational expenses positively affected both the profitability and the market value of the company. These findings indicate that marketing investments should not be considered separately from other operating expenses of the company, companies that can control other operating expenses and increase the ratio of marketing investments in total expenses can achieve better financial performance.