Meeting Or Beating Analysts' Revenue Forecasts Using Advertising Activities

Dong Hyun Son
2020 Journal of Applied Business Research  
This paper investigates the relationship between the likelihood of accomplishing the revenue expectations and the use of firms' advertising expenditures depending on firms' growth properties. First, using the analysts' revenue forecasts as a proxy of revenues expected by market participants, the test shows that growth firms spend more resources in their advertising activities to boost up their reported revenues than non-growth firms do. The paper also examines whether the effect of the
more » ... ect of the interaction between the growth properties of firms and the use of advertising expenses on the probability of achieving analysts' revenue forecasts can vary conditionally on firms' business strategies. Empirical results display that the positive relation between growth firms and the probability of meeting or exceeding analysts' revenue forecasts are statistically significant for cost leadership firms but not for differentiation firms. These findings suggest that unlike differentiators, cost leaders with growth properties are more likely to achieve favorable revenue surprises through advertising activities.
doi:10.19030/jabr.v36i1.10320 fatcat:db7ui4glqrbyjjq72i2rrpy2be