The Financial Value of Advertising Exposures and Expenditures

51 Pages Posted: 25 Mar 2014

See all articles by John Healey

John Healey

University of Maryland - Robert H. Smith School of Business

David Godes

University of Maryland

Date Written: March 23, 2014


Previous research studying the financial impact of advertising on firm financial performance has typically measured the effect of aggregate advertising expenditures. This research implicitly relies on the correlation between advertising exposures and expenditures. However, the extant advertising literature has demonstrated that these variables are not perfectly correlated. Using a unique context (stadium naming rights agreements) in which the firm receives a random number of exposures per dollar of advertising expenditures, we separately identify the effects of exposures from expenditures. We develop three analyses to test the impact of advertising exposures and expenditures on firm stock returns and systematic risk. We estimate a stock returns model to find that unexpected advertising exposures are associated with an increase in stock returns. Using an event study methodology, we find that higher advertising expenditures result in a decrease in firm stock returns. Finally, we find that advertising exposures lower firm systematic risk, while advertising expenditures weakly increase firm systematic risk. These results provide insight into prior findings which have found highly heterogeneous effect sizes with substantial sensitivity to modeling assumptions.

Suggested Citation

Healey, John and Godes, David, The Financial Value of Advertising Exposures and Expenditures (March 23, 2014). Robert H. Smith School Research Paper No. RHS 2413279, Available at SSRN: or

John Healey (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

David Godes

University of Maryland ( email )

College Park
College Park, MD 20742
United States

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