Journal of the Academy of Marketing Science
Despite the clearly visible effects of analysts’ pressures on C-level executives in the popular press, there is limited evidence on their effects on marketing spending decisions. This study asks two questions. First, how do analysts’ pressures affect firms’ short-term marketing spending decisions? Based on a sample of 2706 firms during 1987–2009 compiled from Institutional Brokers Earning System, COMPUSTAT, and CRSP databases we find that firms cut marketing spending. Second, more importantly, we ask if firms which remained more committed in the past to marketing spending under analysts’ pressures have higher longer-term stock market performance. We find that the stock market performance of firms more committed to marketing spending under past periods of analysts’ pressures is higher. The findings are replicated for R&D spending and are robust across measures, controls, and methodologies. Consideration of two industry-based moderators, R&D spending and revenue growth, and one firm-based moderator, whether the firm is among the industry’s top four market share or other lower share firms, reveals that the findings are stronger for high R&D and growth industries and lower market share firms. One key implication is that top executives respond to analysts’ pressures by cutting marketing spending in the short term; however, if they can resist these pressures, longer-term stock market performance is higher.
Analysts’ earnings expectations
Stock market return
Value of marketing
European Journal of Marketing
This paper aims to focus on the unique goal of understanding how marketing spending, a proxy for firm visibility, moderates the effects of corporate social responsibility (CSR) strengths and concerns on stock returns in the short and long terms. In contrast to the resource-based view (RBV) of the firm, the visibility theory, based on stakeholder awareness and expectations, offers asymmetric predictions on the moderation effects of marketing spending.
The predictions are tested based on data from KLD, Compustat and Center for Research in Security Prices from 2001-2010 and panel data based regression models.
Two results support the predictions of the visibility theory over those of the RBV. First, strengths are associated with higher stock returns, for low marketing spending firms, and only in the long term. Second, concerns are associated with lower stock returns, for high marketing spending firms, also only in the long term. A profiling analysis indicates that high marketing spending firms have high R&D spending and are more likely to operate in business-to-customer than business-to-business industries.
The two findings highlight the importance of coordination among chief marketing, sustainability and finance officers investing in CSR and marketing for stock returns, contingent on the firm’s marketing and R&D spending and industry characteristics.
This paper identifies conditions under which CSR is and is not related to stock returns, by uniquely considering three variables omitted in most past studies: marketing spending, CSR strengths and concerns and short- and long-term stock returns, all in the same study.
Corporate social responsibility
Stock market returns
European Journal of Marketing
Purpose - This paper aims to address two unique and important questions. First, how do recessions directly affect firms' marketing spending decisions? Second, and more importantly, do firms which are more committed to marketing spending through past recessions achieve better stock market returns?
Design/methodology/approach - This study is based on a combination of National Bureau of Economic Research, COMPUSTAT and Center for Research in Security Prices data on 6,000 firms between 1982 and 2009 which are analyzed using panel data-based regression models.
Findings - The authors find that firms cut marketing spending during recessions. However, firms committed to marketing spending during past recessions achieve better stock market returns. The findings are found to be robust across B2B and B2C industries, different periods and US firms which vary on the proportion of their global revenue from non-US sales.
Research limitations/implications - Top executives cut marketing budgets during recessions; however, if they can resist the pressures, and strategically continue to make marketing investments during recessions, they will achieve higher stock market returns.
Originality/value - This is the first paper to establish the longer-term (not short-term) positive stock market performance of continuous (not episodic) marketing spending through past recessions, i.e. the view that marketing spending is necessary (not discretionary) for stock returns.