Journal of Economics Theory
ISSN: OnlineISSN: Print 1994-8212
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The Optimal Level of Advertising and Long-Run Equilibrium Relationship Between Advertising and Profit: The Case Study of Iranian Sepah Bank
Hamid Kordbacheh, Nader Mehregan and Mina Soltani Nasrabadi
Page: 116-120 | Received 21 Sep 2022, Published online: 21 Sep 2022
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Abstract
The existence of a long-run equilibrium relationship between advertising expenditures and sales revenues or profits suggests that firm’s decisions to fix advertising as a ratio of performance index (Dorfman-Steiner condition) might represent optimal behaviour. This study attempts to provide evidence for such a relationship between advertising expenditures and profit using a sample of monthly time series data in Sepah Bank over the period 2002-2008. The results show the existence of long-run equilibrium relationships between the bank profitability and advertising expenditure in the sample period. This suggests that in long-run the bank's advertising expenditure is in optimal level. The evidence also bears out the hypothesis of existence a two-way causation between advertising expenditures and profit of Sepah Bank in long-run.
How to cite this article:
Hamid Kordbacheh, Nader Mehregan and Mina Soltani Nasrabadi. The Optimal Level of Advertising and Long-Run Equilibrium Relationship Between
Advertising and Profit: The Case Study of Iranian Sepah Bank.
DOI: https://doi.org/10.36478/jeth.2012.116.120
URL: https://www.makhillpublications.co/view-article/1994-8212/jeth.2012.116.120