IDEAS home Printed from https://ideas.repec.org/a/spr/joamsc/v47y2019i5d10.1007_s11747-019-00660-y.html
   My bibliography  Save this article

The effect of cause-related marketing on firm value: a look at Fortune’s most admired all-stars

Author

Listed:
  • Parker J. Woodroof

    (University of Central Arkansas)

  • George D. Deitz

    (The University of Memphis)

  • Katharine M. Howie

    (University of Lethbridge)

  • Robert D. Evans

    (Texas A&M International University)

Abstract

Companies are increasing their use of cause-related marketing as a means of communicating their commitment to corporate social responsibility while accomplishing their strategic goals. Although prior studies suggest that consumers react positively to cause-related marketing programs, understanding of their impact on financial performance remains limited. To address this gap, the authors employ an event study to examine the effects of cause-related marketing announcements on shareholder value using a sample of firms that appeared on Fortune’s Most Admired All-Star list between 2005 and 2017. Study results show that announcement of these initiatives results in a significant loss of shareholder value. These losses are most pronounced for firms making monetary-only contributions, in comparison to those that make in-kind donations. In addition, the negative effects are mitigated for firms that have stronger reputations, have greater resource slack, and operate in more dynamic industries. Moreover, low-reputation and low-slack firms benefit most from in-kind contributions.

Suggested Citation

  • Parker J. Woodroof & George D. Deitz & Katharine M. Howie & Robert D. Evans, 2019. "The effect of cause-related marketing on firm value: a look at Fortune’s most admired all-stars," Journal of the Academy of Marketing Science, Springer, vol. 47(5), pages 899-918, September.
    • Handle: RePEc:spr:joamsc:v:47:y:2019:i:5:d:10.1007_s11747-019-00660-y
    DOI: 10.1007/s11747-019-00660-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11747-019-00660-y
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11747-019-00660-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sandra A. Waddock & Samuel B. Graves, 1997. "The Corporate Social Performance–Financial Performance Link," Strategic Management Journal, Wiley Blackwell, vol. 18(4), pages 303-319, April.
    2. Jay B. Barney, 1986. "Strategic Factor Markets: Expectations, Luck, and Business Strategy," Management Science, INFORMS, vol. 32(10), pages 1231-1241, October.
    3. Robert Jacobson & Natalie Mizik, 2009. "The Financial Markets and Customer Satisfaction: Reexamining Possible Financial Market Mispricing of Customer Satisfaction," Marketing Science, INFORMS, vol. 28(5), pages 810-819, 09-10.
    4. Ben-Zion, Uri & Shalit, Sol S, 1975. "Size, Leverage, and Dividend Record as Determinants of Equity Risk," Journal of Finance, American Finance Association, vol. 30(4), pages 1015-1026, September.
    5. John Y. Campbell & Jens Hilscher & Jan Szilagyi, 2008. "In Search of Distress Risk," Journal of Finance, American Finance Association, vol. 63(6), pages 2899-2939, December.
    6. Pracejus, John W. & Olsen, G. Douglas, 2004. "The role of brand/cause fit in the effectiveness of cause-related marketing campaigns," Journal of Business Research, Elsevier, vol. 57(6), pages 635-640, June.
    7. Cornwell, T. Bettina & Coote, Leonard V., 2005. "Corporate sponsorship of a cause: the role of identification in purchase intent," Journal of Business Research, Elsevier, vol. 58(3), pages 268-276, March.
    8. Lynch, John G, Jr & Marmorstein, Howard & Weigold, Michael F, 1988. "Choices from Sets Including Remembered Brands: Use of Recalled Attributes and Prior Overall Evaluations," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 15(2), pages 169-184, September.
    9. Kathleen M. Eisenhardt & Jeffrey A. Martin, 2000. "Dynamic capabilities: what are they?," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 1105-1121, October.
    10. Raassens, N., 2011. "The performance implications of outsourcing," Other publications TiSEM 07e9b053-67dc-4fc6-b550-1, Tilburg University, School of Economics and Management.
    11. Isabell Lenz & Hauke A. Wetzel & Maik Hammerschmidt, 2017. "Can doing good lead to doing poorly? Firm value implications of CSR in the face of CSI," Journal of the Academy of Marketing Science, Springer, vol. 45(5), pages 677-697, September.
    12. Milton Friedman, 1971. "A Theoretical Framework for Monetary Analysis," NBER Books, National Bureau of Economic Research, Inc, number frie71-1, March.
    13. Peter M. Madsen & Zachariah J. Rodgers, 2015. "Looking good by doing good: The antecedents and consequences of stakeholder attention to corporate disaster relief," Strategic Management Journal, Wiley Blackwell, vol. 36(5), pages 776-794, May.
    14. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    15. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    16. Michel Ballings & Heath McCullough & Neeraj Bharadwaj, 2018. "Cause marketing and customer profitability," Journal of the Academy of Marketing Science, Springer, vol. 46(2), pages 234-251, March.
    17. Alina Sorescu & Nooshin L. Warren & Larisa Ertekin, 2017. "Event study methodology in the marketing literature: an overview," Journal of the Academy of Marketing Science, Springer, vol. 45(2), pages 186-207, March.
    18. Gordon Liu & Wai-Wai Ko, 2011. "An Analysis of Cause-Related Marketing Implementation Strategies Through Social Alliance: Partnership Conditions and Strategic Objectives," Journal of Business Ethics, Springer, vol. 100(2), pages 253-281, May.
    19. Strahilevitz, Michal & Myers, John G, 1998. "Donations to Charity as Purchase Incentives: How Well They Work May Depend on What You Are Trying to Sell," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 24(4), pages 434-446, March.
    20. Abhishek Borah & Gerard J. Tellis, 2014. "Make, Buy, or Ally? Choice of and Payoff from Announcements of Alternate Strategies for Innovations," Marketing Science, INFORMS, vol. 33(1), pages 114-133, January.
    21. Margaret A. Peteraf & Jay B. Barney, 2003. "Unraveling the resource-based tangle," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 309-323.
    22. Michael A. Wiles & Shailendra P. Jain & Saurabh Mishra & Charles Lindsey, 2010. "Stock Market Response to Regulatory Reports of Deceptive Advertising: The Moderating Effect of Omission Bias and Firm Reputation," Marketing Science, INFORMS, vol. 29(5), pages 828-845, 09-10.
    23. Keller, Kevin Lane, 2003. "Brand Synthesis: The Multidimensionality of Brand Knowledge," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 29(4), pages 595-600, March.
    24. Andreas Chatzidakis & Sally Hibbert & Andrew Smith, 2007. "Why People Don’t Take their Concerns about Fair Trade to the Supermarket: The Role of Neutralisation," Journal of Business Ethics, Springer, vol. 74(1), pages 89-100, August.
    25. João Guerreiro & Paulo Rita & Duarte Trigueiros, 2016. "A Text Mining-Based Review of Cause-Related Marketing Literature," Journal of Business Ethics, Springer, vol. 139(1), pages 111-128, November.
    26. Daniel W. Elfenbein & Brian McManus, 2010. "A Greater Price for a Greater Good? Evidence That Consumers Pay More for Charity-Linked Products," American Economic Journal: Economic Policy, American Economic Association, vol. 2(2), pages 28-60, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fernando Rey Castillo-Villar & Judith Cavazos-Arroyo, 2020. "Social Representations of “Rounding Up” as a Cause-Related Marketing Practice: A Study of Mexican Millennials," Sustainability, MDPI, vol. 12(13), pages 1-12, June.
    2. Lien Lamey & Els Breugelmans & Maya Vuegen & Anne ter Braak, 2021. "Retail service innovations and their impact on retailer shareholder value: evidence from an event study," Journal of the Academy of Marketing Science, Springer, vol. 49(4), pages 811-833, July.
    3. Vanitha Swaminathan & Sayan Gupta & Kevin Lane Keller & Donald Lehmann, 2022. "Brand actions and financial consequences: a review of key findings and directions for future research," Journal of the Academy of Marketing Science, Springer, vol. 50(4), pages 639-664, July.
    4. Hina Yaqub Bhatti & M. Mercedes Galan-Ladero & Clementina Galera-Casquet, 2023. "Cause-related marketing: a systematic review of the literature," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 20(1), pages 25-64, March.
    5. Anran Zhang & Pamela Saleme & Bo Pang & James Durl & Zhengliang Xu, 2020. "A Systematic Review of Experimental Studies Investigating the Effect of Cause-Related Marketing on Consumer Purchase Intention," Sustainability, MDPI, vol. 12(22), pages 1-23, November.
    6. Jublee, Daniel Inbaraj & Kasilingam, Dharun & Stephen, Gladys, 2023. "Investigating the impact of brand vs cause interaction on cause related advertisements," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    7. Xiong, Yangchun & Lam, Hugo K.S. & Hu, Qiaoxuan & Yee, Rachel W.Y. & Blome, Constantin, 2021. "The financial impacts of environmental violations on supply chains: Evidence from an emerging market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 151(C).
    8. Rosemary Muvinya Muange & Ng’etich Willy Kiptoo, 2020. "Moderating Effect of Firm Size on the Relationship between Joint Marketing Alliances and Firm Performance of Retail Firms in Nairobi County, Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 4(8), pages 273-284, August.
    9. Julia Hartmann & Sebastian Forkmann & Sabine Benoit & Stephan C. Henneberg, 2022. "A consumer perspective on managing the consequences of chain liability," Journal of Supply Chain Management, Institute for Supply Management, vol. 58(4), pages 58-89, October.
    10. Tejaswi Patil & Zillur Rahman, 2023. "Mapping the Cause-Related Marketing (CRM) field: document co-citation and bibliographic coupling approach," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 20(2), pages 491-520, June.
    11. Wesley Friske & Seth A. Hoelscher & Atanas Nik Nikolov, 2023. "The impact of voluntary sustainability reporting on firm value: Insights from signaling theory," Journal of the Academy of Marketing Science, Springer, vol. 51(2), pages 372-392, March.
    12. Jaehong Lee & Suyon Kim & Eunsoo Kim, 2021. "Designation as the Most Admired Firms to the Sustainable Management of Taxes: Evidence from South Korea," Sustainability, MDPI, vol. 13(14), pages 1-17, July.
    13. Astvansh, Vivek & Eshghi, Kamran, 2023. "The effects of regulatory investigation, supplier defect, and product age on stock investors’ reaction to an automobile recall," Journal of Business Research, Elsevier, vol. 167(C).
    14. Janny C. Hoekstra & Peter S. H. Leeflang, 2020. "Marketing in the era of COVID-19," Italian Journal of Marketing, Springer, vol. 2020(4), pages 249-260, December.
    15. Ginder, Whitney & Byun, Sang-Eun, 2022. "To trust or not to trust? The interplay between labor-related CSR claim type and prior CSR reputation of apparel retailers," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).
    16. Amel Chaabouni & Kaouther Jridi & Fatma Bakini, 2021. "Cause-related marketing: scepticism and warm glow as impacts of donation size on purchase intention," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 18(1), pages 129-150, March.
    17. Edeling, Alexander & Srinivasan, Shuba & Hanssens, Dominique M., 2021. "The marketing–finance interface: A new integrative review of metrics, methods, and findings and an agenda for future research," International Journal of Research in Marketing, Elsevier, vol. 38(4), pages 857-876.
    18. Baraldi, Enrico & Ciabuschi, Francesco & Kronlid, Carl & Lindahl, Olof, 2022. "Managing interorganizational interactions for social impact: A study of two antibiotics R&D networks," Journal of Business Research, Elsevier, vol. 141(C), pages 264-278.
    19. Marleen Hermans & Néomie Raassens & Kathleen Cleeren, 2024. "What is the impact of a conflict delisting on firm value? An investigation of the role of conflict and firm characteristics," Journal of the Academy of Marketing Science, Springer, vol. 52(1), pages 240-259, January.
    20. Wolter, Jeremy S. & Donavan, D. Todd & Giebelhausen, Michael, 2021. "The corporate reputation and consumer-company identification link as a sensemaking process: A cross-level interaction analysis," Journal of Business Research, Elsevier, vol. 132(C), pages 289-300.
    21. Khan, Imran & Hollebeek, Linda D. & Fatma, Mobin & Islam, Jamid Ul & Riivits-Arkonsuo, Iivi, 2020. "Customer experience and commitment in retailing: Does customer age matter?," Journal of Retailing and Consumer Services, Elsevier, vol. 57(C).
    22. Nic S Terblanche & Christo Boshoff & Debbie Human-Van Eck, 2023. "The influence of cause-related marketing campaign structural elements on consumers’ cognitive and affective attitudes and purchase intention," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 20(1), pages 193-223, March.
    23. Michael C. Peasley & Parker J. Woodroof & Joshua T. Coleman, 2021. "Processing Contradictory CSR Information: The Influence of Primacy and Recency Effects on the Consumer-Firm Relationship," Journal of Business Ethics, Springer, vol. 172(2), pages 275-289, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tejaswi Patil & Zillur Rahman, 2023. "Mapping the Cause-Related Marketing (CRM) field: document co-citation and bibliographic coupling approach," International Review on Public and Nonprofit Marketing, Springer;International Association of Public and Non-Profit Marketing, vol. 20(2), pages 491-520, June.
    2. Stefan J. Hock & Sascha Raithel, 2020. "Managing Negative Celebrity Endorser Publicity: How Announcements of Firm (Non)Responses Affect Stock Returns," Management Science, INFORMS, vol. 66(3), pages 1473-1495, March.
    3. Gottschalg, Oliver & Zollo, Mauricio, 2006. "Interest alignment and competitive advantage," HEC Research Papers Series 823, HEC Paris.
    4. Judith Cavazos-Arroyo & Rogelio Puente-Diaz, 2019. "The Influence of Marketing Capability in Mexican Social Enterprises," Sustainability, MDPI, vol. 11(17), pages 1-15, August.
    5. Azmi, Wajahat & Hassan, M. Kabir & Houston, Reza & Karim, Mohammad Sydul, 2021. "ESG activities and banking performance: International evidence from emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 70(C).
    6. Chang, Chia-Chi & Chen, Po-Yu, 2019. "Which maximizes donations: Charitable giving as an incentive or incentives for charitable giving?," Journal of Business Research, Elsevier, vol. 97(C), pages 65-75.
    7. Mehmet Ali Köseoglu & John A. Parnell & Melissa Yan Yee Yick, 2021. "Identifying influential studies and maturity level in intellectual structure of fields: evidence from strategic management," Scientometrics, Springer;Akadémiai Kiadó, vol. 126(2), pages 1271-1309, February.
    8. Lippert, Inge, 2008. "Perspektivenverschiebungen in der Corporate Governance: Neuere Ansätze und Studien der Corporate-Governance-Forschung," Discussion Papers, Research Unit: Knowledge, Production Systems and Work SP III 2008-302, WZB Berlin Social Science Center.
    9. Gordon Liu & Wai Wai Ko, 2014. "An integrated model of cause-related marketing strategy development," AMS Review, Springer;Academy of Marketing Science, vol. 4(3), pages 78-95, December.
    10. João José M. Ferreira & Cristina I. Fernandes & Vanessa Ratten, 2016. "A co-citation bibliometric analysis of strategic management research," Scientometrics, Springer;Akadémiai Kiadó, vol. 109(1), pages 1-32, October.
    11. Tan, Justin & Wang, Liang, 2010. "Flexibility-efficiency tradeoff and performance implications among Chinese SOEs," Journal of Business Research, Elsevier, vol. 63(4), pages 356-362, April.
    12. Ester Chen & Ilanit Gavious & Nadav Steinberg, 2019. "Dividends from unrealized earnings and default risk," Review of Accounting Studies, Springer, vol. 24(2), pages 491-535, June.
    13. Jasjit Singh & Nina Teng & Serguei Netessine, 2019. "Philanthropic Campaigns and Customer Behavior: Field Experiments on an Online Taxi Booking Platform," Management Science, INFORMS, vol. 65(2), pages 913-932, February.
    14. Trespeuch Léo & Robinot Élisabeth, 2023. "Exploring the Impact of Corporate Philanthropy on Brand Authenticity in the Luxury Industry: Scale Development and Empirical Studies," Sustainability, MDPI, vol. 15(16), pages 1-21, August.
    15. Stoelhorst, J. W. & van Raaij, Erik M., 2004. "On explaining performance differentials: Marketing and the managerial theory of the firm," Journal of Business Research, Elsevier, vol. 57(5), pages 462-477, May.
    16. Aurélien Acquier & Cedric Dalmasso, 2013. "Combining Strategic Agility and Sustainable Competitive Advantage: the need for Resource Sensitivity," Post-Print hal-01487685, HAL.
    17. Gangi, Francesco & Meles, Antonio & Monferrà, Stefano & Mustilli, Mario, 2020. "Does corporate social responsibility help the survivorship of SMEs and large firms?," Global Finance Journal, Elsevier, vol. 43(C).
    18. Nicolaï Foss & Nils Stieglitz, 2012. "Modern Resource-based Theory(ies)," Chapters, in: Michael Dietrich & Jackie Krafft (ed.), Handbook on the Economics and Theory of the Firm, chapter 20, Edward Elgar Publishing.
    19. Manjunath Padigar & Ljubomir Pupovac & Ashish Sinha & Rajendra Srivastava, 2022. "The effect of marketing department power on investor responses to announcements of AI-embedded new product innovations," Journal of the Academy of Marketing Science, Springer, vol. 50(6), pages 1277-1298, November.
    20. Gordon Liu, 2013. "Impacts of Instrumental Versus Relational Centered Logic on Cause-Related Marketing Decision Making," Journal of Business Ethics, Springer, vol. 113(2), pages 243-263, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joamsc:v:47:y:2019:i:5:d:10.1007_s11747-019-00660-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.