Cyclical vulnerability and resilience in advertising firms: A regional financial perspective

Abstract

In this paper, we examined how macroeconomic cycles shape the financial outcomes of advertising firms in Spain. Using population-level firm data for all Spanish provinces over 2000–2024, we combined province-level Toda–Yamamoto Granger causality and Hatemi-J asymmetric causality tests with panel-level evidence based on the heterogeneous panel causality framework of Emirmahmutoglu and Kose (2011). All causality specifications incorporated controls for the scale of the local advertising market, including firm-size proxies and aggregate advertising activity. The results revealed strong business-cycle asymmetries and substantial geographical heterogeneity. However, the uneven distribution of statistically significant provincial effects was not random. Ridge-penalized logistic models showed that the probability of observing significant first-stage effects is systematically related to provincial macroeconomic scale and financial structure, and that these determinants differ sharply across business-cycle regimes. During expansions, significant effects concentrate primarily on balance-sheet outcomes (solvency and equity), whereas during recessions, significance shifts to operating-performance outcomes (revenues and EBITDA). Overall, the findings refine the procyclicality debate in advertising by linking cyclical sensitivity to regional macro-financial structures and state-dependent mechanisms governing operating outcomes and balance-sheet resilience.