Munich Personal RePEc Archive

How does advertisement spending affect business performance of both islamic and conventional banks?

Roslan, Ahmad Ridza and Masih, Mansur (2017): How does advertisement spending affect business performance of both islamic and conventional banks?

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Abstract

The study aims at exploring the influence of the advertising on performance of the banks operating in Malaysia and if there is any difference in such relation by the type of banks such as, Islamic or Conventional. An ARDL analysis has been done on two Banks in Malaysia to find out whether there is any relationship between banks performance and marketing expenditure of Islamic Bank and Conventional bank. The informative view of advertising suggests that advertising has a pro-competitive role. Comanor and Wilson (1967, 1974) provide alternative tests of the informative view by regressing profitability on advertising intensity and other variables and posits that advertising causes profitability. Using the annual data of the bank enlisted in the Bursa Malaysia, this study takes an ARDL approach to test Comanor-Wilson hypothesis in reduced form. The findings tend to indicate that the performance of Public Islamic Bank standing as a proxy for Islamic bank in Malaysia, in the long-run and in the short run is not impacted by its marketing intensity. Further study should be done, on what basis is the bank still spending its advertising budget (Marketing)? This contradicts Comanor and Wilson’s informative view that the advertising intensity and other variables cause profitability.

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