Abstract: Theory analysis suggests that firm performance is positively related to advertising expenditure and R&D expenditure, and the relationship is influenced by corporate size and controlling shareholders. Based on a sample of Chinese listed corporations, empirical results show that the relationship between R&D expenditure and firm performance is statistically significant positive, however the relationship between advertising expenditure and firm performance is statistically insignificant. In terms of corporate size, the significantly positive relationship between R&D expenditure and firm performance exists only in small firms, and for the big firms, advertising expenditure is significantly positive related to firm performance. In terms of controlling shareholders, the relationship between R&D expenditure and firm performance is significantly positive for the firms without a controlling shareholder; and the relationship between advertising expenditure and firm performance is significantly positive for the firms with a controlling shareholder. These conclusions are further confirmed by robust test.

Key words: advertising expenditure, R&D expenditure, firm performance