The Effect of Advertising Activity on Operating Performance in Convention Centers : The Empirical Evidence from Korea’s Top 5 Convention Centers

Abstract

This study investigates empirically the effect of advertising activities on the financial performance in convention centers. While the previous studies reported that advertising activities of companies have a positive effect on financial performance in general, the financial effect of advertising expenditure is expected to be different in firms which operate with business purpose of common good. Using financial data of top 5 convention centers (i.e., COEX, KINTEX, BEXCO, EXCO, and ICC) in Korea, the study conducted the regression analysis, taking advertisement expenses as a proxy for the level of advertising activities, and sales revenues or operating income for the financial performance. The empirical results reveal that the advertising activities have a positive relation to financial performance, but only sales revenues. This result holds with the analysis on future changes in the financial performance. This indicates that the advertising activity of the convention company play a positive role in enhancing the financial performance, while its relationship with the operating profit produced in the company's accounting system is difficult to be grasped. This study is meaningful in that it shows the empirical findings of the effect of advertising activities in the convention centers on financial performance. The findings suggest that it is necessary to increase the expenditure of advertisement to highten the profitability of the convention center.