Recession-Proof Marketing? Unraveling the Impact of Advertising Efficiency on Stock Volatility

Bakr Al-Gamrh, Tareq Rasul

Research output: Contribution to journalArticlepeer-review


The current study examines how corporate advertising efficiency (estimated using data envelopment analysis) is impacted during economic recessions. The study then investigates how advertising efficiency affects stock price volatility in recession and non-recession times. Drawing on the resource-based view and contingency theory, this study utilizes generalized method of moments (GMM) estimation to analyze a sample of 1,043 US listed firms. The findings reveal that advertising efficiency tends to decline during economic downturns. Moreover, the study demonstrates that firms with higher advertising efficiency experience more stable stock prices during normal economic conditions. However, an interesting observation emerges during recessions, as firms with strong advertising efficiency face higher stock price volatility. This suggests that while consumers are attracted to efficient advertisements, investors do not assign the same value to advertising spending during economic contractions. Importantly, these results are robust to endogeneity issues and various measurements of variables.
Original languageEnglish
Article number103087
JournalInternational Review of Financial Analysis
Publication statusPublished - 1 Mar 2024


  • Advertising Efficiency
  • Stock Price
  • Recessions
  • Economic Change


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