Advertising expenditures and unobserved heterogeneity in bank performance: A conditional nonparametric frontier analysis

Abstract

AbstractThis study utilizes a probabilistic production analysis framework to explore the relationship between advertising expenditure and operational efficiency in major U.S. banks (2001–2020). Findings reveal a non‐linear, positive correlation between advertising spending and banks' technological innovation capacity. Higher advertising investments enhance banks' competitiveness and drive technological progress. The model considers unobserved heterogeneity, incorporating factors like socio‐economic profiles and past non‐performing loans. Robustness analysis across sub‐periods confirms the enduring positive impact of advertising on bank performance.