The Study On The Effect Of Advertise Spending Of The Public Companies

This paper chooses the listed companies in Shanghai and Shenzhen Exchange from the 2010 to2014 as the sample, using advertisement cost which is a secondary subject of sales expenses in the financial statements as advertising spending and sales revenue,illiquid factor and stock returns as revenue, stock liquidity and stock returns index, to study how the advertising spending affects the company's sales, stock liquidity and stock returns.The results of the study show that the company's advertising spending and the sales revenue exist an obvious positive correlation relationship, which means that the increasing advertising spending will cause an increase of incomes. Using the illiquid factor to measure the liquidity of stocks, we find that advertising spending is positive associated with the illiquid factor, which means that the company's advertising impact on stock liquidity in a positive direction. Regression results show that the advertising spending are negatively related with the company's stock returns.According to the results, we believe that the company can improve advertise spending to increase revenue, attract the attention of consumers and investors, and improve recognition. However, the company simply can't increase revenue through advertising spending with ignoring its products. Research of this paper has a clear theoretical and realistic significance and provides a evidence support and suggest for advertising spending decisions.