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.
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Social marketing campaigns (e.g., Dove’s “Real Beauty” campaign), corporate activism efforts (e.g., Starbucks’ “race together” campaign), and use of celebrity endorsers associated with social causes in brand promotion (e.g., Nike’s Colin Kaepernick advertisement) are not cause-related marketing by our definition and fall outside the scope of this research.
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Woodroof, P.J., Deitz, G.D., Howie, K.M. et al. The effect of cause-related marketing on firm value: a look at Fortune’s most admired all-stars. J. of the Acad. Mark. Sci. 47, 899–918 (2019). https://doi.org/10.1007/s11747-019-00660-y
- Cause-related marketing
- Corporate social responsibility
- Shareholder value
- Event-study analysis
- Resource based view