An Empirical Study on the Relevance of Advertising, Sales Promotion, R&D, and Training and Development Expenses on Firm Value in the Indian Context

Discretionary expenses: R&D, advertisement, and training & development create intangible assets such as innovative products, brand equity, and intellectual capital. Literature survey suggests that intangibles drive long-term value of the firm and reduce its systematic risk. Sales promotion expenses though create value in short-term, but dilute brand equity in the long-term and are a zero sum game. The present study has captured value relevance of such discretionary expenses on firm value in the Indian context. Positive and significant impact of sales promotion and training and development on firm value (Tobin’s q) in current year has been observed. Sales promotion impacts favourably in short-term, while no significant impact of R&D spend on firm value has been observed. Positive impact of training and development expenses on firm value has been captured and it does not dissipate with time. It emerges that firms may take holistic view of these discretionary expenses.