A Decision Model for Advertising Expense: From the Perspective of the Blockholder's Private Benefits

Abstract

This paper examines how the size of private benefits of large owners, measured using block premium, affects changes in advertising expense of the company. If large owners enjoy private benefits through engaging in pet projects, it will result in increased advertising expense. On a sample of 130 firms whose blocks of shares are traded in the U.S., we show that the magnitude of private benefits is not associated with changes in advertising expense.