Promotional Mix And Corporate Performance - An Empirical Study

Abstract

This paper attempts to show the long term relationship between operating income and Advertisement and Sales Promotional expenditures, while also conjecturing a relation between growth rate of firms and spending in ASP and making an effort to identify the financing pattern of these discretionary expenditures. The empirical study with 151 BSE A group listed firms over a span of 8 years reveals that there is invariably a time lag involved in the impact of ASP expenses on both sales revenue and profits. The study also unearths the importance of the impact of a change in previous years’ ASP budgets on profits and sales revenue in current year. The results are a caveat to firms who allocate ASP budgets based on previous year’s sales, showing that reducing budgets drastically may have negative magnified effects on profits in later years. The paper goes on to highlight how certain important factors like growth rate of firms and debt to equity ratio play a crucial role in influencing the ASP expenses in a particular time period.