The effect of product placement advertisement legalization on firms’ sales growth: Evidence in Korea

초록

This study investigates the effect of PPL (Product Placement) advertisement in Korea on listed firms’ sales growth in an empirical way. Most existing literatures argue that PPL advertisement brings negative impacts on sales of PPL products theoretically. It is difficult to find studies of examining the effect of PPL advertisment to sales growth empirically. Thus, from the listed firms’ financial data, this study examines the change on sales pre and post PPL advertisement legalization periods in Korea. Korea is selected for the sample of this study, because Korea provides a good research setting for watching the PPL effectiveness; PPL advertisement has been legislated in Korea since 2010. In the past, the way to advertising through broadcasting was very limited so that some advertisements were illegally prevalent, but the PPL legalization allows that the advertisers more freely expose their products in various ways. For testing the effectiveness of PPL advertisement after the legalization, unique dataset of listed firms in Korea are collected. As a result, this study supports that there is a significantly negative association between PPL advertisement legalization and firms’ sales growth rate. This negative association is still robusted when firms increases their advertsiment expenses. This implies customers are possible to receieve a negative impression from direct exposure of PPL advertisement. This result warns about the riskiness of exposing products indiscrimately through media content. © 2015 Canadian Center of Science and Education. All rights reserved.

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