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

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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.

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Notes

  1. 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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Acknowledgements

We would like to thank the three blind reviewers for all of their valuable critiques throughout this process. We also greatly appreciate Dr. Michael Peasley and Dr. Stacey Robinson for the feedback and insight they provided along the way.

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Authors and Affiliations

  1. University of Central Arkansas, Beatrice Powell St, Conway, AR, 72034, USA

    Parker J. Woodroof

  2. The University of Memphis, 3675 Central Ave, Memphis, TN, 38152, USA

    George D. Deitz

  3. University of Lethbridge, 4401 University Dr W, Lethbridge, AB, T1K 3M4, Canada

    Katharine M. Howie

  4. Texas A&M International University, 5201 University Blvd, Laredo, TX, 78041, USA

    Robert D. Evans Jr

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  1. Parker J. Woodroof
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Appendix A

Appendix A

Table 8 Type of cause-related partnership *
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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

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