The Effect of Marketing Investment on Firm Value and Systematic Risk

TL;DR

This study investigates how marketing investment influences firm value and systematic risk in emerging markets, highlighting the moderating role of ownership concentration and providing insights into governance and marketing strategies.

Contribution

It offers new empirical evidence on the positive impact of marketing investment on firm value and the moderating effects of ownership concentration in emerging markets.

Findings

Marketing investment positively affects firm value.

Ownership concentration reinforces the marketing-value relationship.

Ownership concentration moderates systematic risk through shareholder monitoring.

Abstract

Analyzing the financial benefit of marketing is still a critical topic for both practitioners and researchers. Companies consider marketing costs as a type of investment and expect this investment to be returned to the company in the form of profit. On the other hand, companies adopt different innovative strategies to increase their value. Therefore, this study aims to test the impact of marketing investment on firm value and systematic risk. To do so, data related to four Arabic emerging markets during the period 2010-2019 are considered, and firm share price and beta share are considered to measure firm value and systematic risk, respectively. Since a firm's ownership concentration is a determinant factor in firm value and systematic risk, this variable is considered a moderated variable in the relationship between marketing investment and firm value and systematic risk. The findings of the study, using panel data regression, indicate that increasing investment in marketing has a positive effect on the firm value valuation model. It is also found that the ownership concentration variable has a reinforcing role in the relationship between marketing investment and firm value. It is also disclosed that it moderates the systematic risk aligned with the monitoring impact of controlling shareholders. This study provides a logical combination of governance-marketing dimensions to interpret performance indicators in the capital market.