How do Marketing Decisions impact Market Share and Firm Value?

Presenter: Professor Piyush ‘Pi’ Sharma
School of Marketing, Curtin University

Abstract
This paper combines the ‘chain-of-effects’ framework for marketing productivity with agency theory to explore the underlying mechanism that drives the effects of marketing decisions (measured by marketing expenses and relative compensation for executive directors with marketing experience) on firm value (Tobin’s Q) via firm performance (market share). Data from 491 Chinese listed companies shows that marketing expenditure positively affects firm value but not through market share, whereas relative compensation positively affects firm value, both directly and through market share. The positive effect of relative compensation on market share is weaker for firms with higher marketing expenses and stronger for firms with more severe agency conflicts (e.g., state-owned firms). Interestingly, market share has a negative effect on firm value that is stronger for firms faced with higher market concentration (Herfindahl index). Besides extending research on the impact of marketing decisions on financial performance (e.g., firm value), these results provide useful directions to firms on how to manage this relationship.

Keywords: agency conflict; firm value; market share; marketing expenditure; ownership type; relative compensation

Biography
Professor Sharma has more than thirty years’ experience in industry and academics in India, Singapore, Hong Kong and Australia. He is the Regional Editor (Asia) for Journal of Knowledge Management and Associate Editor (Marketing) for Journal of Business Research, and has served as Associate Editor for Journal of Services Marketing and Co-editor for Marketing Intelligence & Planning in the past. He is also a member of the editorial boards of Journal of International Business Studies, Journal of the Academy of Marketing Science, Journal of Service Research, European Journal of Marketing, and Journal of Service Theory and Practice, among others. He has published about seventy articles on topics ranging from cross-cultural consumer behavior to branding and marketing strategy, services and international marketing to multi-disciplinary topics, in major international journals and presented his research at more than hundred international conferences. He has delivered keynote speeches and conducted research workshops around the world. He also works very closely with his research partners around the world and with industry partners mostly in the service sector.