A Note on the Relationship between Firm Diversification and Corporate Advertising Expenditures

Using data on 200 major U.S. advertisers, our empirical analysis examines the relationship between the degree of firm diversification and corporate advertising expenditures, while controlling for competing explanations. Data on corporate advertising expenditures are obtained from Leading National Advertisers (1989). Compustat line of business data and Hoover's Handbook are used to construct measures of firm diversification, and other firm/industry characteristics included as covariates in our empirical analysis to account for possible alternative explanations. Our results suggest that less diversified firms spend more on corporate advertising.