This is a great point, and the authors don't take it into account. Expensing advertising certainly provides tax shield and it will make a significant difference

This is a great point, and the authors don't take it into account. Expensing advertising certainly provides tax shield and it will make a significant difference at the margin. Edit: The taxation become relevant while considering expensing vs capitalizing advertising. I am not an accountant but from what I understand, at least in the US, advertising is commonly expensed.