Marketing spending, firm visibility, and asymmetric stock returns of corporate social responsibility strengths and concerns

Abstract

Purpose 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. Design/methodology/approach 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. Findings 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. Practical implications 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. Originality/value 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.

How market value relates to corporate philanthropy and its assurance. The moderating effect of the business sector

“…Therefore, sector can moderate the relationship between the company's corporate philanthropy and its financial performance. In this sense, when a company operating in an industrial sector projects a stable, socially oriented form of corporate philanthropy, the effect of the management of its corporate philanthropy through a foundation on its market value will be heightened (Oh, Bae, Currim, Lim, & Zhang, 2016). In addition, whether or not investors perceive the benefit of the signal and identify the donations as credible practices (Groening & Kanuri, 2018) in industrial companies (Peterson & Su, 2017), these activities could also affect market value.…”

Does ethics really matter to the sustainability of new ventures? The relationship between entrepreneurial ethics, firm visibility and entrepreneurial performance

“…This high interaction could enhance stakeholders' attention and understanding of the enterprise and its operational activities; thus, meaningful feedback can be produced [47][48]. At the same time, with higher firm visibility, more benefits would be obtained from CSR practice [49]. Such benefits could be growing digital and representation effects [46], enhancing stakeholder recognition, improving financial performance [15] and gaining more investment for research and development expenditure [50], and promoting more enterprise innovation [51].…”

The Impact of Marketing on the Business Performance of Companies: A Literature Review

“…Marketing expenditures are funds of companies that are allocated to spending on advertising and other marketing communication activities such as digital and mobile marketing, press conferences, experiential marketing events and sales promotions. Previous studies have used components of marketing spending in a variety of definitions depending on their main foci and research design, such as advertising spending or marketing spending that includes both advertising, selling and general administrative costs (Oh et al, 2016). Marketing expenditures are not only shortterm expenditures but also long-term investments for a company since marketing activities contribute to the firm's brand equity that will improve the profit margin, current and future earnings (Graham & Frankenberger, 2011).…”

“…In this perspective, marketing is considered as a capability of the firm that differentiates it from its competitors since a value creating marketing strategy that is not simultaneously imitated by any competitor is a source of competitive advantage (Barney, 1991). For example, a unique positioning that is backed up with a valuable and inimitable marketing offering or a corporate social responsibility campaign are the intangible assets of a company that can improve its financial performance (Oh et al, 2016). On the other hand, brand equity perspective interprets the impact of marketing on firm's performance through strong and positive brand associations.…”