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Chapter 10: Corporate Financial Policy and Marketing Strategy: The Case of IPOs and SEOs
Didem Kurt and John Hulland INTRODUCTION Previous research on the marketing–finance interface has focused primarily on studying the direct market value consequences of changes in specific marketing elements such as advertising, customer satisfaction, and branding (e.g., Pauwels et al., 2004; Gruca and Rego, 2005; Mizik and Jacobson, 2008; Joshi and Hanssens, 2009; Luo, 2009; Srinivasan et al., 2009). Related research has examined how changes in corporate strategy (e.g., mergers and acquisitions) affect both marketing strategy and shareholder value (e.g., Bahadir et al., 2008; Swaminathan et al., 2008). One major impetus behind much of this work is the realization that marketing’s influence within the firm has declined over the past few decades (e.g., see Brown et al., 2005; Webster et al., 2005; Verhoef and Leeflang, 2009), particularly in the boardroom (Sheth and Sisodia, 2006; Nath and Mahajan, 2008). As an additional step in enhancing our understanding of the interaction between marketing and finance, scholars have started to examine the interaction between corporate financial policy and marketing strategy and its impact on firm value (e.g., Mizik and Jacobson, 2007; Luo, 2008; Kurt and Hulland, 2010). This growing body of literature offers valuable insights into managerial decisions for firms that routinely consider various forms of financing in order to make appropriate marketing decisions. In particular, it has become increasingly clear that equity financing plays a crucial role in supporting major increases in marketing spending. For example, Garmaise (2009, p. 325) notes that ‘marketing assets are typically financed with equity.’1 Thus, a better...
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