Asset Value Of UK Firms Advertising Expenditures

This paper empirically investigates the relationship between advertising expenditures and the market value of firms using a valuation model and a sample of UK firms for the period between 1998 and 2003. The research findings indicate that advertising expenditures are significantly associated with increases in market value, suggesting that capitalizing advertising expenditures is appropriate. These results improve the understanding of the gap between the market value and book value of firms by focusing on intangible assets (R&D and advertising), which do not appear on financial statements.