Valuation of Intangible Expenditures: Revisiting Bublitz and Ettredge (1989)

An extensive body of accounting research documents the difficulty of measuring the value of intangibles and the issues surrounding recording them in company financial statements. Early studies examined advertising and research and development (R&D) expenditures when companies began reporting them in their financials in 1972. A lot has changed in the years subsequent to the early studies: investments have shifted from tangible to intangible, more data are available, and statistical techniques have improved. This study replicates and extends the findings in Bublitz and Ettredge (1989) using data from 1984 to 2018, finding similar relationships between returns and advertising and R&D expenditures in the later time period. The paper also extends their study by investigating the relationship between intangible expenditures and future payoffs, finding mixed results.