EXPRESS: Does Country-Level Advertising Spending Influence Consumer Credit? International Evidence

While advertising is known to influence consumer preferences and spending, its impact on household borrowing behavior remains underexplored. The authors address this gap by examining whether country-level advertising spending encourages consumers to borrow more to purchase branded products. Using a unique dataset on consumer credit from 18 countries, the article assesses the direct effect of advertising spending on consumer credit. Drawing on Institutional Theory, the authors focus on three pillars, namely, the normative pillar (income inequality), the regulatory pillar (rule of law and regulatory quality), and the cultural pillar (conservatism and self-enhancement) as moderators of advertising’s impact on consumer credit. The findings suggest that advertising spending is positively associated with consumer credit. This result is robust to various model specifications, endogeneity, and alternative mechanisms. The strength of advertising spending’s impact on consumer credit depends on normative pillar (income inequality), and regulatory pillar of the institutional environment (rule of law, and regulatory quality) but not cultural values. Collectively, the results suggest that advertising spending has a significant impact on consumer borrowing but its impact on consumer spending depends primarily on income inequality, rule of law, and regulatory quality differences across countries.