Strategic Secrecy or Managerial Shielding: Examining the Motives Behind Confidential Advertising Expenditures

We examine the common practice of non-disclosure of corporate advertising expenditures. While some firms explicitly disclose these figures, others do not, suggesting that their expenditures are insignificant or that the firm prioritizes strategic secrecy. Theoretical and empirical research suggests that non-disclosure is consistent with maximizing shareholder value. However, non-disclosure may also reflect managerial self-interest and the desire to manage investor expectations, especially by unproven CEOs. We seek to understand the scenarios in which shareholder value maximization or the pursuit of managerial self-interest might lead firms to keep their advertising expenditures confidential. Using a unique dataset from the Kantar Group, we classify firms into three categories: those that report it, those that keep these expenditures confidential, and those with minimal advertising expenditures. Our results indicate that non-disclosure often appears detrimental to firm value, suggesting that a complex interplay of both competitive strategy and managerial incentive influence the disclosure of advertising expenditures.