Relationship marketing's role in managing the firm–investor dyad

a r t i c l e i n f o Keywords: Marketing-finance interface Investor relations Role of marketing Market-based assets This paper develops an interdisciplinary conceptual framework demonstrating the role of marketing in managing investor relationships. The framework illustrates how companies can turn investor relationships into market-based assets by analyzing and managing them from a relationship marketing and stakeholder perspective. Marketing can contribute to investor relationship management and increase shareholder value by lowering the cost of equity capital, increasing analyst coverage and stock liquidity, and reducing shareholder activism. An investigation among investor relations professionals working at publicly traded companies in the Euronext 100 stock index demonstrates the framework's empirical validity and provides managerial implications. Intangibles under marketing control, like customer equity, constitute an increasing proportion of firm value (Lukas et al., 2005) and empirical studies show a positive link between managing such marketing assets and stock market performance (Srinivasan and Hanssens, 2009). The notion of market-based assets integrates existing but often overlooked linkages between marketing and the firm's financial well-being (Srivastava et al., 1998). By employing internal resources, firms create assets that materialize as value through interactions with entities in the external environment. Market-based assets are either intellectual or relational: This study focuses on the latter type. According to the resource-based view, organizations engage in partner relationships to effectively and efficiently pool scarce resources and create a relation-based competitive advantage (Morgan and Hunt, 1999). Investment capital is one such key resource. Nurturing the relationships with its providers – investors – should therefore receive considerable attention from the corporation in general, and its marketers in specific. Although marketing's conceptual and methodological approaches are applicable to this exchange relationship (Lovett and MacDonald, 2005), the shareholder as a relational marketing group remains largely neglected. This is surprising, since shareholders ultimately bear the cost of marketing's decisions. As such, they (should) have a significant impact on marketing strategy (Srinivasan and Hanssens, 2009), and be represented amongst marketing's key external stakeholders (cf. Srivastava et al., 1998). Investor relations (IR) initiatives drive shareholder value by enhancing demand for a firm's shares, lowering cost of capital (Botosan, 2006), increasing stock liquidity (Healy et al., 1999), and enhancing analyst following (Francis et al., 1997). Studying their management represents a key research opportunity for the marketing discipline (Hanssens et al., 2009). As a strategic management responsibility, IR integrates finance, communication, and marketing (NIRI, 2008). Existing literature, however, is …