| Summary: | This paper uses the ‘chain-of-effects’ framework for marketing productivity and agency
theory to explore the underlying mechanism that drives the effects of marketing decisions
(measured by marketing expenses and relative compensation for executive directors with
marketing experience) on firm value (Tobin’s Q) via firm performance (market share). Data
from 491 Chinese listed companies over the 2010-14 period shows that marketing
expenditure positively affects firm value but not through market share. In contrast, relative
compensation positively affects firm value, both directly and through market share.
Moreover, the positive effect of relative compensation on market share appears to be stronger
in an organization with more severe agency conflicts. Besides extending current research on
the effects of marketing decisions on financial outcomes, these results highlight the
importance of having executive directors with marketing experience to increase firm value.
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