Advertising in Family Firms

Depending on the used definition well over half of the firms in western economies can be classified as family firms. Although the role and impact of advertising on (the performance of) firms is studied intensively little research has been done on advertising in family firms. To extent literature on the subject this thesis investigates the relationship between advertising and (the performance of) family firms. Data on the S&P500 was used to research two subjects: first of all the difference in levels of advertising between family and non-family firms. For a number of definitions and characteristics of the family firm the advertising intensity is analysed. T-tests show a significant higher advertising intensity for family firms. Clustered OLS regressions including variables indicating ownership and managerial characteristics of the family firm show that businesses owned by lone founders (first generation family firms) and family owned businesses tend to have higher advertising intensity then other businesses. However only the results on the lone founders are significant. Secondly the influence of advertising intensity on the (financial) performance of the family firms was investigated. In general this research finds that a higher advertising intensity has a positive influence on the market-to-book ratio of firms. The analysis on the interaction of family ownership and advertising intensity in relation to the market-to-book ratio gives mixed results. The data shows that, depending on the percentage of shares owned by the family or lone founder, advertising intensity influences the market-to ratio negatively. However only a few interactions were significant in the models. Copyright ©