Stock mispricing and myopic marketing management

We examine whether stock mispricing affects firms’ likelihood of adopting myopic marketing management. Drawing on myopic marketing management theory (Mizik, 2010), we argue that when stock prices deviate from fundamentals, managers adjust marketing and R&D expenditures in response. Using 34,302 firm-year observations from 1980 to 2016, we find an asymmetric effect where overpricing decreases the likelihood of myopic marketing management more than underpricing increases it. Equity issuance weakens this relationship, whereas firm growth strengthens it. Our research extends myopic marketing management theory by showing that the direction of mispricing changes managers’ incentives to maintain or reduce short- and long-term marketing expenditures. The findings also provide guidance for CMOs and CFOs. Marketing responses to stock mispricing should account for whether the firm is overpriced or underpriced, as well as its equity issuance and growth.