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Commitment to marketing spending through recessions

Commitment to marketing spending through recessions PurposeThis paper aims to address two unique and important questions. First, how do recessions directly affect firms’ marketing spending decisions? Second, and more importantly, do firms which are more committed to marketing spending through past recessions achieve better stock market returns?Design/methodology/approachThis study is based on a combination of National Bureau of Economic Research, COMPUSTAT and Center for Research in Security Prices data on 6,000 firms between 1982 and 2009 which are analyzed using panel data-based regression models.FindingsThe authors find that firms cut marketing spending during recessions. However, firms committed to marketing spending during past recessions achieve better stock market returns. The findings are found to be robust across B2B and B2C industries, different periods and US firms which vary on the proportion of their global revenue from non-US sales.Research limitations/implicationsTop executives cut marketing budgets during recessions; however, if they can resist the pressures, and strategically continue to make marketing investments during recessions, they will achieve higher stock market returns.Originality/valueThis is the first paper to establish the longer-term (not short-term) positive stock market performance of continuous (not episodic) marketing spending through past recessions, i.e. the view that marketing spending is necessary (not discretionary) for stock returns. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png European Journal of Marketing Emerald Publishing

Commitment to marketing spending through recessions

Currim, Imran S.; Lim, Jooseop; Zhang, Yu
European Journal of Marketing , Volume 50 (12): 28 – Nov 14, 2016
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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0309-0566
DOI
10.1108/EJM-08-2015-0541
Publisher site
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Abstract

PurposeThis paper aims to address two unique and important questions. First, how do recessions directly affect firms’ marketing spending decisions? Second, and more importantly, do firms which are more committed to marketing spending through past recessions achieve better stock market returns?Design/methodology/approachThis study is based on a combination of National Bureau of Economic Research, COMPUSTAT and Center for Research in Security Prices data on 6,000 firms between 1982 and 2009 which are analyzed using panel data-based regression models.FindingsThe authors find that firms cut marketing spending during recessions. However, firms committed to marketing spending during past recessions achieve better stock market returns. The findings are found to be robust across B2B and B2C industries, different periods and US firms which vary on the proportion of their global revenue from non-US sales.Research limitations/implicationsTop executives cut marketing budgets during recessions; however, if they can resist the pressures, and strategically continue to make marketing investments during recessions, they will achieve higher stock market returns.Originality/valueThis is the first paper to establish the longer-term (not short-term) positive stock market performance of continuous (not episodic) marketing spending through past recessions, i.e. the view that marketing spending is necessary (not discretionary) for stock returns.

Journal

European Journal of Marketing – Emerald Publishing

Published: Nov 14, 2016

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