The Impacts of Advertising Assets and R&D Assets on Reducing Bankruptcy Risk

Research has shown that advertising assets and R&D (research and development) assets increase shareholder value. Although one might conclude that their impacts on bankruptcy risk are merely the inverse of their impacts on shareholder value, we argue otherwise and show that the differences hinge on the fact that shareholder value is a function of expected cash flows from all future periods, whereas bankruptcy risk is a function of expected cash flow from only the next period. We show that current market turbulence moderates the impacts of advertising assets and R&D assets on expected cash flow from the next period but not on expected cash flows from more distant future periods. Therefore, market turbulence moderates the impacts of advertising assets and R&D assets on bankruptcy risk but not shareholder value. Market stability increases the impact of advertising assets on reducing bankruptcy risk, whereas market turbulence increases the impact of R&D assets on reducing bankruptcy risk. Using a data set of more than 1,000 firms covering three decades, we find support for our hypotheses. Out-of-sample validation indicates that bankruptcy prediction performance improves when including marketing variables in addition to the usual financial predictors. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mksc.2015.0913 .

• 저널Marketing Science · 34(4) · 555–572
• 토픽Corporate Finance and Governance · Accounting
• DOI10.1287/mksc.2015.0913
• 저자Niket Jindal, Leigh McAlister