What Determines Profitability in the Indian Automobile Industry?

This study tends to examine the firm-level profitability determinants of Indian automobile and ancillary industry which is recognised for its global competitiveness. The study uses recent dataset to investigate the firm-level profitability determinants in the Indian automobile and ancillary industry and records the effect of shifts in profitability due to change in economic environment. This study intends at using real financial balanced panel data for a period 1999–2019 and applies the two-step system generalised method of moments regression model with robust standard errors. The study has found that lagged profitability, marketing and advertising intensity, firm’s market power and operational efficiency have exercised positive impact on firm-level profitability. Negative and statistically significant impact of raw material import intensity and export intensity highlights the need of planning and implementation of appropriate investment strategies. The findings of this study suggest that firms should pay more attention to optimise their operating expenditures, marketing and advertisement expenditures and expand their market power as a part of their survival and growth strategy. JEL Code: L25

Frenemies: Corporate Advertising Under Common Ownership

In this paper, we investigate the impact of ownership structure on corporate advertising expenditures. Using mutual fund mergers as an exogenous shock to ownership structure, we find that competing firms owned by the same institutional blockholders experience a significant reduction in advertising expenditure. The reduction in advertising expenditure is more likely to occur in the presence of higher coordination benefits or lower coordination costs. Specifically, this effect is more pronounced for firms in more competitive industries, in higher advertising-intensity industries, with greater common ownership, with more concentrated institutional ownership, and with headquarters located in the same state. Overall, our empirical evidence indicates that ownership by common institutional investors significantly affects corporate advertising strategy. This paper was accepted by Matthew Shum, marketing.

Ad Blocking

In recent years, ad blocking has become a significant threat to advertising-supported content. Adblockers typically negotiate with publishers, allowing some ads to go through in return for a payment, a practice called (partial) whitelisting in the industry. Ad blocking has a direct positive effect on consumers by reducing advertising intensity. On the other hand, the practice clearly hurts publishers and reduces their incentives to invest in content quality. Lower content quality, in turn has an indirect negative effect on consumers. This paper builds an analytic model to explore the net impact of ad blocking on consumers, how it depends on various market characteristics, and how uniformly it affects consumers. The results show that under a broad set of market conditions, total consumer surplus and even total welfare decline under ad blocking. Whereas some consumers are always better off with an ad blocker, for the average consumer, the impact of quality decline is larger than that of ad reduction. The analysis highlights the detrimental role of ad blockers’ current revenue model—in which value is created for the consumers but it is captured from publishers—in decreasing quality, consumer surplus, and total welfare. Analyzing the impact of varying levels of negotiation power between the ad blocker and publisher reveals that full negotiation power is not preferred by the ad blocker. A lower negotiation power allows the ad blocker to commit to less value extraction from the publisher, thereby leading to higher content quality. Additional model extensions show that the main results are robust. In the case of multiple publishers with different levels of competition between them, the strong negative effect of ad blocking on quality holds. This paper was accepted by Juanjuan Zhang, marketing.

Effect of Demonetization on Advertising, Research & Development and Human Resource Intensities and its Impact on Firm’s Performance

Investing in advertising, research and development (R&D) and human resource management and development (HRMD) enabled firms to achieve competitive advantage and improve profitability. Indian economy witnessed the event of ‘Demonetization’ in November 2016 that created short term cash shortage. The study aimed at understanding the relationship of advertising, R&D and HRMD intensities on firm performance (proxied with return on assets). The effects of demonetization on these variables were explored. Financial data of listed Indian firms, over the years 2014–2019 was collected from CMIE Prowess database for the analysis using fixed effects panel-data regression. Results indicated significant positive relationship between R&D and advertising intensity with firm’s performance pre-demonetization, while reduced effect post-demonetization. HRMD intensity had a negative relationship pre as well as post-demonetization on firm’s performance. The results provided insights for managers and decision-makers on the impact of cash resource allocation on R&D, HRMD and advertising expenditures in creating firm value.

Formation of the structure of commodity markets and barriers to entry to them in the conditions of digitalization of the economy: the advertising factor

The article is addressed to a wide range of readers, including research economists, as well as those who teach and study the theory of industrial markets in universities, and is devoted to the formation of the structure of commodity markets — both traditional and modern digital. The authors try to make progress in revealing the nature of the influence of the intensity of advertising activity in the industry on the values of concentration indicators, the size of entry barriers, and other structural parameters of industry markets. Based on the analysis of data on the Russian markets of mobile communication services and pharmaceuticals, the fundamental applicability of the concept of «U-shaped inverted curve» for characterizing the relationship between the level of advertising intensity in the industry and the values of concentration indices is established. On this basis, the hypothesis is formulated that the influence of the level of advertising intensity, including as an industry entry barrier, on the structure of markets is more significant in conditions of low and / or moderate concentration. The authors argue that the processes of digitalization of the economy today not only dynamically change the boundaries of modern industry markets and the nature of competition in them, but also strengthen the potential of advertising communications as a significant factor in the formation of the structure of digital markets.

The Impact of Shopee's Youtube Ads Shopee Version 4.4 Mega Elektronik Sale on Purchase Intention

Shopee's e-commerce in recent years has dominated the Indonesian online market because it offers a variety of attractive features. The support for Youtube Ads makes it easier for businesses to offer their products online. Shopee ads are packaged in Youtube Ads with a tagline that can spark consumer interest. One of the Shopee Ad taglines is Shopee 4.4 Mega Elektronik Sale. This tagline is quite booming considering that electronics is a part of modernization which is the basic need of generation Z. This study aims to measure how far the exposure of Shopee's 4.4 version of Shopee's advertisement is. Mega Elektronik Sale: New Refrigerator, Price Slams 50% on student buying interest. The novelty in this study refers to Youtube's capacity as an advertising medium to influence student purchase intentions as the largest market share of electronic products. The research is structured with a quantitative approach with a survey method. The results showed that 44% of students' buying interest was influenced by the Shopee advertisement version of the Shopee 4.4 Mega Elektronik Sale. The Shopee ad version of Shopee 4.4 Mega Elektronik Sale has a positive and significant effect on buying interest with a fairly strong correlation value, namely 0.663 which indicates that the stronger the advertising intensity can directly increase student buying interest.

An Analysis of the Partnership between Retailers and Low-credibility News Publishers

In this paper, we provide a large-scale analysis of the display ad ecosystem that supports low-credibility and traditional news sites, with a particular focus on the relationship between retailers and news producers. We study this relationship from both the retailer and news producer perspectives. First, focusing on the retailers, our work reveals high-profile retailers that are frequently advertised on low-credibility news sites, including those that are more likely to be advertised on low-credibility news sites than traditional news sites. Additionally, despite high-profile retailers having more resources and incentive to dissociate with low-credibility news publishers, we surprisingly do not observe a strong relationship between retailer popularity and advertising intensity on low-credibility news sites. We also do not observe a significant difference across different market sectors. Second, turning to the publishers, we characterize how different retailers are contributing to the ad revenue stream of low-credibility news sites. We observe that retailers who are among the top-10K websites on the Internet account for a quarter of all ad traffic on low-credibility news sites. Nevertheless, we show that low-credibility news sites are already becoming less reliant on popular retailers over time, highlighting the dynamic nature of the low-credibility news ad ecosystem.

Internationalisation and financial performance: in the case of global automotive firms

Purpose Given the mixed evidence on the relationship between internationalisation and firm performance, the purpose of this study is to investigate the effect of internationalisation on the financial performance in the setting of a matured and stagnant market, the global automotive industry. Design/methodology/approach The study uses 37 automotive manufacturers covering from 2000 to 2015. Panel regression analyses were used to estimate the relationship between four financial performance variables (return on equity [ROE], return on asset [ROA], return on capital [ROC] and return on sales [ROS]) and three main independent variables (foreign assets to total assets [FATA], research and development intensity [RNDi], advertising intensity [ADVi]), controlling for product diversification, firm size, age and risk. Findings The findings reveal that automotive firms with a lower FATA ratio, lower RNDi and higher ADVi tend to achieve higher financial performance. However, the intensity of product diversification does not influence the financial performance of global automakers. Ceteris paribus, larger firms in terms of market capitalisation and new entrants into the market tend to have higher financial performance relative to smaller and older firms. Originality/value This study contributes to the literature first by examining the relationship between internationalisation and firm performance in the setting of a matured market, i.e. the automotive industry. Secondly, the paper uses a multinational sample at a global level; and third, it analyses financial performance on a comprehensive basis via four measures, namely, ROA, ROE, ROC and ROS, as the dependent variables.

An Insight into Determinants of Corporate Social Responsibility Decoupling: Evidence from Pakistan

The study aims to examine what causes firms to engage in Corporate Social Responsibility (CSR) Decoupling. It also highlights the intensity of the firms to be involved in the decoupling of firms’ actual from claimed CSR practices. The study hypothesizes a significant association between CSR decoupling and its various antecedents. The documented antecedents are coercive isomorphism, monitoring mechanism, firm reputation, resource slack, and firm advertising intensity. Based on Institutional Theory and Stakeholder Theory, the present study accounts for the gap between firms’ actual CSR efforts and its professed CSR while also highlighting the factors and conditions under which firms overstate and misrepresent their CSR activities. The sample of the study includes 200 non-financial Pakistani firms listed on Pakistan Stock Exchange (PSX) with a time frame ranging from 2010 to 2018. The model under study is tested using common effects regression. The study findings reveal that non-financial firms operating in Pakistan are highly engaged in CSR decoupling. Also, coercive isomorphism, monitoring mechanisms, and firm reputation are significantly associated with CSR decoupling.