The Effect of Abnormal Marketing and Capital Expenditure on Firm Value

Abstract

The study analyzed the effect of abnormal marketing and capital expenditure on firm value. Public firms in consumer staples sectors within the Association of Southeast Asian Nations (ASEAN)-5 countries, such as Indonesia, Malaysia, Thailand, the Philippines, and Vietnam, were chosen as the sample. Data collection yielded 432 data points from 144 firms during the period 2018–2020. The effect of abnormal marketing and capital expenditure on firm value was analyzed using cross-sectional regression analysis. The dependent variable was firm value, proxied by Tobin’s Q. The independent variables were abnormal marketing and capital expenditure. Abnormal marketing expenditure was measured using the difference between the marketing expenditure to total assets ratio for the year of interest, that is, 2018–2020, and the 5-year average of the marketing expenditure to total assets ratio for the years 2013–2017. The same methods applied to abnormal capital expenditure. The control variables were internal financial constraints, that is, Kaplan–Zingales (KZ) index; external financial constraints, that is, financial development index; and COVID-19, which is a dummy variable with a value of 1 for the pandemic period and zero otherwise. The study revealed that positive abnormal marketing and capital expenditure exhibit an adverse impact on firm value and financial constraints increase the negative effect of abnormal marketing and capital expenditure on firm value.