Value relevance of the voluntary disclosure of advertising expenditure: evidence from Canada

Abstract

This paper investigates whether the voluntary disclosure of advertising expenditure by Canadian firms is value relevant. The analysis is based on a matched sample of 876 firms listed on the Canadian Toronto Stock Exchange over the period 2007-2014. There were 438 firms that disclosed their advertising expenditures, which we refer to as disclosers and 438 firms that did not disclose, which we refer to as non-disclosers. The findings suggest that advertising expenditure is positively related to firm value, a firm size effect exists and that only for certain sectors is this expenditure value relevant. We also found a positive relationship between market value and advertising expenditure for discloser firms. The results are stable across several econometric models that control for endogeneity. The implications for disclosure strategies of firms are discussed.