Research between marketing to financial performance has mainly focused on how marketing assets and actions add perceived value to the product/service offered. It’s evenly important to recognize how marketing decisions can decrease value. The established theory and in-depth interviews with practitioners identify a set of factors that can explain the “heterogeneity” in the scale of indirect costs associated with negative marketing-related events. Specifically, they address how the regulatory exposure of deceptive marketing, which carries no direct cost to the firm, affects shareholder value. The analysis shows that incidents of exposed deceptive marketing are associated with significant, negative abnormal returns amounting to a drop of 1%, which translates into a wealth loss of $86 million for the median-sized firm in the sample. When deception is highly egregious or directed at vulnerable populations, firm value is more negatively affected than when the potential to mislead and harm is not readily verifiable. Furthermore, when the cited product has substantial brand market share, the levels of egregiousness and target audience explain substantially more of the variation in event impact than when brand market share is low. The results are robust to alternative stock-portfolio-based measures of abnormal returns, model specification, and examination of risk. (Tipton M, Bharadwaj S, Robertson D. Regulatory Exposure of Deceptive Marketing and Its Impact on Firm Value. Journal of Marketing [serial online]. November 2009;73(6):227-243. Available from: Business Source Premier, Ipswich, MA. Accessed November 24, 2009)
