When do Chief Marketing Officers Affect Firm Value? A Customer Power Explanation

Abstract

Recent discussions in academic literature and the business press often paint an unflattering picture of the contributions of chief marketing officers (CMOs) to the financial value of their firms. Some even suggest that CMOs, despite being the marketing leaders in firms, have little or no effect on firm performance. However, formal empirical research on the impact of CMOs on financial performance is scarce. This article presents conceptual arguments and empirical evidence about this controversial issue. The authors suggest that CMOs are far from irrelevant to the financial performance of firms. However, the impact of CMOs on financial performance is highly contingent on the managerial discretion available to them. Focusing on the role of customer power in limiting the managerial discretion available to CMOs, this study identifies individual and firm-specific conditions in which CMOs contribute more or less to firm value. Analyses of abnormal stock returns associated with the appointment of CMOs provide support for the hypothesized effects of customer power and managerial discretion.