Influence of CEOs’ religious affiliations on firms’ advertising spending and shareholder value

Abstract

Purpose

This study aims to answer two unique related questions on the overarching relationship between a CEO’s personal religious affiliation, the firm’s advertising spending decision and its shareholder value. First, does the CEO’s religious affiliation, a proxy for risk taking, influence the firm’s advertising spending decision? Second, does the advertising spending decision mediate the relationship between the CEO’s religious affiliation and the firm’s shareholder value?

Design/methodology/approach

This study uses data on the religious affiliations of CEOs of publicly listed US firms, 1992–2014, from Marquis Who’s Who; advertising spending and shareholder value from Compustat, and panel data-based regression models including CEO characteristics from ExecuComp, and firm-, industry- and time-based controls.

Findings

We find higher advertising spending levels for Protestant over Catholic-led firms, and advertising spending mediates the relationship between a CEO’s religious affiliation and the firm’s shareholder value.

Research limitations/implications

Marketing theory needs to incorporate the missing but fundamental effect of the CEO’s religious affiliation-based values on decisions and outcomes.

Practical implications

Boards of Directors may need to align the CEO’s and their firm’s spending goals.

Originality/value

While previous studies focused on the influence of religious affiliation on consumers’ attitudes and behavior, and executives’ financial and R&D spending decisions, this study, to the best of the authors’ knowledge, is the first to investigate the effect of a CEO’s religious affiliation on the firm’s advertising spending decision and its shareholder value.

Citation

Oh, H., Bae, J., Currim, I.S., Lim, J. and Zhang, Y. (2021), "Influence of CEOs’ religious affiliations on firms’ advertising spending and shareholder value", European Journal of Marketing, Vol. 55 No. 5, pp. 1440-1468. https://doi.org/10.1108/EJM-01-2019-0024