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

Hannah Oh (University of California, Irvine, California, USA, and School of Business, University of Texas, Brownsville, Texas, USA)
John Bae (University of California, Irvine, California, USA, and University of Texas Rio Grande Valley, Brownsville, Texas, USA)
Imran S. Currim (University of California, Irvine, California, USA)
Jooseop Lim (John Molson School of Business, Concordia University, Montreal, Canada)
Yu Zhang (China Europe International Business School, Shanghai, China and University of California, Irvine, California, USA)

European Journal of Marketing

ISSN: 0309-0566

Article publication date: 9 May 2016

1873

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.

Keywords

Acknowledgements

This paper is based on Hannah Oh’s dissertation completed at UCI. The work began when John Bae was a PhD student at UCI. This paper is supported by the Dean’s office of the UCI Merage School of Business.

Citation

Oh, H., Bae, J., Currim, I.S., Lim, J. and Zhang, Y. (2016), "Marketing spending, firm visibility, and asymmetric stock returns of corporate social responsibility strengths and concerns", European Journal of Marketing, Vol. 50 No. 5/6, pp. 838-862. https://doi.org/10.1108/EJM-05-2015-0290

Publisher

:

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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