The main objective of this study is to examine the role of business cycles in moderating the impact of marketing on firms’ financial performance. Specifically, the present research aims to determine whether the effect of marketing expenditures on return on assets (ROA) varies across different phases of the business cycle, namely recession and expansion, or is influenced by macroeconomic conditions.

This study utilizes quarterly data from 96 manufacturing firms listed on the Tehran Stock Exchange over the period 2018–2024. The dependent variable is ROA, considered as an indicator of firms’ financial performance, while the main independent variable is marketing expenditure. Business cycles are categorized into recession and expansion periods, and to investigate their moderating role, an interaction term between marketing expenditure and business cycle phases is included. In addition, control variables such as financial leverage, inflation rate, and exchange rate are incorporated into the model. Panel data analysis with a fixed-effects estimator is employed, allowing for the control of unobserved heterogeneity across firms.

The results indicate that marketing expenditures have a negative impact on ROA in both recession and expansion periods. However, this effect is not statistically significant at the 95% confidence level during expansion, whereas it is significant and negative during recession. The interaction effect of marketing expenditures and business cycles is found to be negative and significant during recession, but positive and significant during expansion. Furthermore, financial leverage and inflation exert a significant negative effect on ROA, whereas the exchange rate has a significant positive impact on firms’ financial performance.

Based on these findings, it can be concluded that the impact of marketing on firms’ financial performance is not static or independent of economic conditions; rather, it is significantly influenced by business cycle phases. Specifically, during economic recessions, increased marketing expenditures may impose additional pressure on ROA, whereas in expansion periods, these expenditures can play a reinforcing role in enhancing financial performance through their interaction with favorable economic conditions.