The Impact of Firm Management’s Stated Marketing Focus on Abnormal Stock Returns in Investor Earnings Calls
(A2024-119488)

AUTHORS

sudhir voleti, Indian School of Business (ISB); praveen kopalle, Dartmouth College

ABSTRACT

We propose and use a novel construct (“stated marketing focus”) to mine the incidence and emphasis of marketing information in firms' quarterly earnings conference calls for a large sample of firms (S&P1500) over a reasonably long time-frame (15 years) to summarize and capture the marketing function's contribution to firms’ financial market returns. Thereafter, we employ an event study approach followed by a calendar-time abnormal returns model with time-varying risk factors to investigate, validate and empirically establish the value-relevance, explanatory power and predictive power of the SMF construct on cumulative abnormal stock returns over the short term. We find that controlling for known covariates such as financial variables and earnings surprises, marketing information disclosed in earnings calls systematically, statistically significantly and persistently affects market returns. Further, we find evidence that marketing information contains a predictive signal over horizons spanning 1 to 3 months. These findings offer useful implications for firms, financial market participants and marketing function stakeholders.