Marketing and finance executives follow different objectives and focus on different stakeholder groups. Marketers want to create sales impact. Finance executives are concerned about the financial health of the firm. As a result, both worlds tend to be rather disconnected in their daily business. We argue that this does not reflect the dynamics of the firm where important marketing and financial metrics in fact interact. As long as marketing and finance officers do not fully appreciate the interplay of their key metrics, their decisions are likely to be suboptimal.
This article proposes a simultaneous equation model that reflects the interaction of marketing and finance-domain variables in the value creation process. We focus on brand-building activities and the attraction of capital as major tasks of marketing and finance officers. Our model shows how advertising and other investments increase customer-based brand equity (CBBE) that in turn impacts financial leverage and credit spread and ultimately elevates the level of financial resources.
Based on a broad sample of 155 firms covering various B2C industries, we test for the empirical relevance of our model. We also assess the practical significance of our results by transforming them into elasticities. Our results suggest that marketing and finance executives need to consider the dynamic interaction of their decision and performance variables to fully evaluate the effects of their decisions on the firm's financial health.
As of April 2015, Alexander Himme is Assistant Professor of Management Accounting at Kühne Logistics University. He received his PhD in Management Accounting and Marketing at the University of Kiel (Germany). He holds a Diploma in Business Administration from the University of Kiel. Before joining Kühne Logistics University he worked as an Assistant Professor at Vlerick Business School (Belgium) and as a Post-Doc at the Universities of Cologne and Passau (Germany). At the University of Cologne he received his cumulative habilitation. In addition, Alexander Himme spent one year as a Visiting Scholar at the Graduate School of Business at Stanford University and the University of California in Los Angeles (UCLA).
Himme's specialization is on the field of performance measurement, valuation of intangibles, marketing accounting, and cost management. His work is positioned at the accounting-marketing interface. In this context his research deals with the influence of intangibles on accounting metrics like the cost of capital. The aim of the research is to quantify the return of investments in intangible assets like brands, customer equity, or corporate reputation. For determining the return of investments in intangible assets his research also focuses on ways how to measure and to evaluate these assets. Determining the drivers of a successful cost management is another pillar of his research projects. His research has been published among others in Journal of Management Control, International Journal of Research in Marketing, Journal of Cost Management, Zeitschrift für Betriebswirtschaft (Journal of Business Economics), and Marketing ZFP. He has also presented his work at major international conferences (e.g., Congress of the European Accounting Association, Marketing Science Conference, Marketing Strategy Meets Wall Street).
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