The Effect of Product Placement Advertisement Legalization on Firms’ Sales Growth: Evidence in Korea

  •  Chang Seop Rhee    
  •  Hyunjung Rhee    


This study investigates the effect of PPL (Product Placement) advertisement in Korea on listed firms’ salesgrowth in an empirical way. Most existing literatures argue that PPL advertisement brings negative impacts onsales of PPL products theoretically. It is difficult to find studies of examining the effect of PPL advertisment tosales growth empirically. Thus, from the listed firms’ financial data, this study examines the change on sales preand post PPL advertisement legalization periods in Korea. Korea is selected for the sample of this study, becauseKorea provides a good research setting for watching the PPL effectiveness; PPL advertisement has beenlegislated in Korea since 2010. In the past, the way to advertising through broadcasting was very limited so thatsome advertisements were illegally prevalent, but the PPL legalization allows that the advertisers more freelyexpose 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 significantlynegative association between PPL advertisement legalization and firms’ sales growth rate. This negativeassociation is still robusted when firms increases their advertsiment expenses. This implies customers arepossible to receieve a negative impression from direct exposure of PPL advertisement. This result warns aboutthe riskiness of exposing products indiscrimately through media content.

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