Analyzing The Relationship Between Marketing Expenses and Firm Performance for Manufacturing Industry Sub-Sectors: Panel Causality

Abstract

Purpose - The study aims to examine the relationship between marketing expenses and firm performance in manufacturing industry firms traded in Borsa Istanbul. While analyzing this relationship, firms are divided into 7 sub-sectors according to their activities. Thus, it is also aimed to determine whether the relationship between marketing expenses and firm performance differs from sector to sector. Design/Methodology/Approach - Dumitrescu-Hurlin (2012) panel causality test was preferred in the study, which including 102 firms, 2007Q1-2023Q3 data. The logarithm of marketing expenses (LPAZ) and marketing intensity (PYOG) variables are used to represent marketing expenditures; while the logarithm of net sales (LSAT) and operating profitability (FVK) variables are used as indicators of firm performance. As a method, Dumitrescu-Hurlin (2012) test, which enables causality testing in panel data sets, is preferred. Findings - According to the results of the analysis the most observed type of causality relationship is the causality relationship from marketing expenses to net sales (LPAZ → LSAT), which is observed in all sub-sectors. Moreover, the sub-sectors with the most intense relationship between marketing expenditures and firm performance are (i) Food, Beverages and Tobacco, (ii) Chemicals, Pharmaceuticals, Petroleum, Rubber and Plastic Products and (iii) Metal Goods, Machinery, Electrical Equipment and Transportation Vehicles. Discussion - The results of the study generally reveal that there is a significant causal link between marketing expenses and firm performance in manufacturing industry firms. The findings are largely consistent with other studies in the literature. Moreover, these causality linkages do not follow the same course in all sub-sectors, but also differ from each other.