Uncovering key actors in the marketing-firm value link




Sihi, Debika

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The objective of this dissertation is to provide insights on key actors who affect the link between marketing and firm value. The first essay examines financial analysts who provide earnings estimates about firms, thereby connecting firm and the stock market. The author uncovers whether and how financial analysts link market-based assets (e.g., brand equity) to a firm's cash flows, drivers of firm value. The author predicts market-based assets affect a firm's cash flow level, volatility, and acceleration through two marketing strategies, the ability to charge price premiums and penetrate new product markets. Hypotheses are tested using data from surveys of 220 North America based financial analysts. Based on analysts' feedback, brand and channel equity affect a firm's ability to penetrate new product markets, and brand equity also affects a firm's ability to charge price premiums. The ability to charge price premiums increases cash flows level while the ability to penetrate new product markets enhances cash flow level and acceleration of cash flows. Finally, channel equity directly lowers cash flow volatility and market intelligence enhances cash flow level. The findings offer evidence that analysts connect a firm's market-based assets to the generation of its cash flows. This has important implications for managers who maintain communications with the financial analyst community. In the second essay, the author examines the impact of a firm's shareholders and board of directors on the marketing-firm value link. The author hypothesizes that a firm's shareholders and board of directors affect how its advertising and R&D dollars are spent and also affect stock market participants' perceptions of this spending, thereby affecting its firm value. Hypotheses are tested using data on 575 publicly listed firms in the United States. The findings indicate that higher shareholder governance and higher marketing spending (both advertising and R&D spending) increase firm value. However, somewhat interestingly, higher board governance and higher advertising spending decrease firm value. These results highlight the importance of considering corporate governance when analyzing the marketing-shareholder value link and offer yet another important reason for the marketing function to have a voice in the firm's boardroom.




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