The impact of firms' risk-taking attitudes on advertising budgets

This study investigates a hypothesis that a firm's advertising budget is an increasing function of its risk-taking attitude resulting from its realized poor performances. The measure of risk attitudes is based on prospect theory (Kahneman and Tversky, 1979). A longitudinal design is developed and data from U.S. brewing firms are used to test the hypothesis on a firm-by-firm basis. Results obtained using the partial least square (PLS) causal...