The Impact Of Advertising And Market Power On Financial Performance

Advertising is one of the forms of non-price competition, which often be used to cope with competition by enterprises. Advertising is not only a tool to improve enterprise’s financial performance, but also an important method of building brand image. There existed large difference between China’s manufacturing enterprises’ market power. And market power will have an impact on the relationship between advertising intensity and financial performance. Therefore, it has great theoretical and practical significance to take market power into the research of market power how to adjust the relationship between advertising intensity and financial performance.Based on literature review and theoretical analysis, this paper tests the hypothesis by using the methods of hierarchical regression analysis, group multitask regression as well as comparative analysis, drawing the following conclusions:(1)China’s manufacturing enterprises’ market power have a U-shaped relationship with their advertising intensity. If enterprises’ market power is 0.0818, the advertising intensity is lowest.(2) Without considering the market power, the advertising intensity have an inverted U-shaped relationship with operating profit margin, and advertising would bring negative impact on corporate profitability, when advertising intensity above0.0983.(3) Market power play a significant role of nonlinear adjustment on the relationship between the advertising intensity and operating profit margins.When the advertising intensity is the same, different market power leads to different effects on the operating profit margin. Similarly,When the market power is the same, different advertising intensity leads to different level of operating profit margin. And the interaction effects of market power in the relationship between advertising and financial performance is significant.(4)In terms of specific industries contrast, comparing to food industry, beverage industry and Textile clothing and footwear industry, in the agricultural andsideline food processing industry and textile industry, enterprises’ market power have slight adjustment effect on the relationship between advertising and operating profit margin.Based on the conclusions, this paper put forward some targeted suggestions from the aspects of enterprise, industry and government.