The Interpretation of Marketing Actions and Communications by the Financial Markets
type: CreativeWork
description: Previous studies have shown that managers are overwhelmingly likely to sacrifice long-term firm value for immediate earnings and satisfaction from the financial markets (Graham, Harvey, and Rajgopal, 2005). Research in marketing has empirically confirmed this myopia at both aggregate (Mizik and Jacobson, 2007; Mizik, 2010) and individual firm levels (Chapman, 2011). That is, marketing managers consider not only actions that impact real earnings, but also how their firm is immediately perceived by the financial markets. Although plenty of research exists detailing how managers care about the financial markets, how the financial markets react to marketing actions has received less attention. That is, how do board members and the general financial markets interpret marketing spending and actions? This dissertation investigates how firms walk the walk and talk the talk regarding marketing spending and communication of strategy. Specifically, I address the following questions: (1) How do financial markets interpret real investments in marketing? and (2) How are these investments and strategic directions communicated to the financial markets? First, I find that markets only appreciate changes in marketing investments when those changes directly result in earnings, not when the investments are made. Second, I created a novel dataset of communications between firms and markets that investigates how marketing constructs are transmitted to the investment community. To address these questions, I use a mixture of event and drift studies. This first essay (a) highlights the importance of long-term stock market reactions and event studies and (b) provides evidence managers can give investors on how firm spending should be interpreted. This evidence is consistent with the market initially under-appreciating marketing efforts. Specifically, I find differences in the immediate market response to earnings announcements for firms expanding versus reducing their marketing and R&D effor…
abstract: Previous studies have shown that managers are overwhelmingly likely to sacrifice long-term firm value for immediate earnings and satisfaction from the financial markets (Graham, Harvey, and Rajgopal, 2005). Research in marketing has empirically confirmed this myopia at both aggregate (Mizik and Jacobson, 2007; Mizik, 2010) and individual firm levels (Chapman, 2011). That is, marketing managers consider not only actions that impact real earnings, but also how their firm is immediately perceived by the financial markets. Although plenty of research exists detailing how managers care about the financial markets, how the financial markets react to marketing actions has received less attention. That is, how do board members and the general financial markets interpret marketing spending and actions? This dissertation investigates how firms walk the walk and talk the talk regarding marketing spending and communication of strategy. Specifically, I address the following questions: (1) How do financial markets interpret real investments in marketing? and (2) How are these investments and strategic directions communicated to the financial markets? First, I find that markets only appreciate changes in marketing investments when those changes directly result in earnings, not when the investments are made. Second, I created a novel dataset of communications between firms and markets that investigates how marketing constructs are transmitted to the investment community. To address these questions, I use a mixture of event and drift studies. This first essay (a) highlights the importance of long-term stock market reactions and event studies and (b) provides evidence managers can give investors on how firm spending should be interpreted. This evidence is consistent with the market initially under-appreciating marketing efforts. Specifically, I find differences in the immediate market response to earnings announcements for firms expanding versus reducing their marketing and R&D effor…
author: Dinner, Isaac Max
language: English
keywords: Marketing, Marketing--Management, Business, Stock exchanges
date published: 2011
date modified: 2026-07-24T01:44:13Z
provider: Columbia University
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: Columbia University

PropertyValue
property ID: DOI
value: 10.7916/D8SF3358