2.1. Marketing, Firm Value, and Systematic Risk
Ref. [
17] analyzed the trend of corporate cost for 50 years from 1945 to 1995; their results revealed that all elements belonging to manufacturing costs dropped from 30% to 50% as a percentage of total corporate costs; the administrative costs contribution dropped from 30% to 20%; while the trend of marketing costs was reversed, rising from 20% to 50% of total costs over the five decades. Further, the marketing budget average equals 11.2% of the global revenue, ranging between 22% in the retail sector and 2.6% in the health and pharma sector [
18].
The shift in marketing expenditure as a long-term investment is an obvious phenomenon in modern business. For example, published financial statements of Apple corporation show
$933 million as the marketing expenses against
$87.1 billion for the brand value items [
19]. The research literature deals with marketing firm value through two paths of marketing variables; the first one focuses on marketing assets’ impact as an ultimate outcome of marketing investment, while the second one deals with the impacts of some marketing actions/strategies as the initial inputs of marketing investment [
20]. By analyzing a considerable set of empirical studies, ref. [
21] concluded that both marketing assets and marketing actions have a clear elasticity through used capital market valuation models; it has been revealed that the elasticity of marketing assets is higher than that from advertising from the marketing actions perspective.
Regarding the impact of marketing assets, brand equity has attracted great interest from researchers, and early attempts to explain the role of a brand were concentrated on its link with the future firm [
22]. Relying on the Capital Asset Pricing Model (CAPM) valuation model, ref. [
23] shows that a high brand value portfolio benefits from a higher level of return and lower level of risk compared to other companies listed and the market return average in the Turkish market, which was confirmed in Latin American markets where companies included in a valuable brand finance list have a lower risk level and higher return level when compared with their counterparts not on the list [
24]. In the Arabic emerging market, ref. [
25] shows that brands enhance their share return and have an informative contain to motivate market response.
On the other hand, in the developed markets framework companies with a high brand capital investment and high brand investment per employee gain higher returns [
26]. In this regard, the research team concluded that brand value correlates positively to return parameters and negatively to both systemic and idiosyncratic risk embedded on CAPM factors [
27]. Furthermore, a high brand value could lower the negative impact of market crises such as the global financial crisis of 2008 [
28].
Moreover, within marketing assets’ collection customer equity has received a high level of priority in marketing, since the customer is the core of business strategies. Similarly, customer equity as an intangible market asset provided a reasonable proxy for firm value and was characterized as an appropriate approach regardless of the firm lifecycle period, especially during the growth peak or times of negative profit, where the traditional financial models could not be applied smoothly [
29]. As well as customer satisfaction, customer loyalty became an efficient measure of companies’ strategic success as well as a measure of the financial outputs of marketing [
30]. In the same manner, customer measurements such as the Customer Satisfaction Index correlate positively with a firm value from one hand and reduce the cost of capital on the other hand [
31]. Customer satisfaction information presents a reliable signal to motivate the investor’s response to the company; for example, when Dell’s customer satisfaction score went down in August 2005 by 6.3%, the share price dropped by 12.5% [
32].
The second part of marketing investment involves marketing actions, which have been interpreted by scholars in the framework of capital market performance. Initially, advertising action is the perceptible part of marketing. It is clear and visible to the audience, and most of the advertising spending information of listed companies is available in popular databases [
10]. Thus, a large body of research has addressed the impact of advertising on firm valuation criteria and related risk in the capital market, where an increase in advertising spending leads to less systematic risk and improved financial health [
2,
33]. Similarly, advertising intensity leads to a low degree of implied cost of capital [
34]; this is because of the increase in investors’ familiarity level with the company, which in turn leads to a higher level of liquidity and return [
35]. Additionally, advertising communication could be an important resource to support investment decisions by providing a clear signal to the company, allowing it to price its products properly and at the same time informing investors about the right value of shares [
36]; thus, investors choose stocks with higher advertising, therefore making it possible that the behavior of the investor could be modified by advertising communication [
15].
In addition to advertising, new product introduction is considered the most influential marketing action on firm value. Introducing a new product is a major outcome of adopting an innovation approach through monitoring and transferring market feedback into actionable inputs to develop the current product or introduce a new one in light of perceived customer needs, ensuring the stable revenue of the firm or reducing the likelihood of risk [
37]. This enhances the long-term value of the firm as a result of the investor’s reaction to new available information, which intensifies over time [
38], while irregularity in the product introducing process has a negative impact on the firm’s value [
39]. Initially, a new innovative product explains and motivates the firm’s value growth compared with imitative products, leading to a lower level of value growth as measured by the Tobin Q TQ ratio [
40]. This extends to a new product announcement, which leads to significant abnormal return, since the announcing of a new product would boost the attractiveness of a firm’s traded shares [
41].
It is worth mentioning that Beta, as a matrix of systematic risk, despite the fact that it is considered a basic portion of the Capital Asset Pricing Model (CAPM), is also an agreed-upon tool to build an efficient investment portfolio [
33]. Besides this, it has been used as a common proxy for the cost of capital in a lot of previous empirical research [
2]. Based on what is mentioned above, marketing variables influence capital market metrics, so it is expected that the relationship can be applied in Arab emerging markets. Thus, the first two hypotheses are as follows:
Hypotheses 1 (H1). Marketing investment has a positive significant impact on firm value.
Hypotheses 2 (H2). Marketing investment has a negative significant impact on firm systematic risk.
2.2. The Role of Ownership
Joint stock ownership structure differs from other corporate legal forms by the nature of ownership, especially in terms of the owner rights as well as its link to capital market mechanisms. Inherently, ownership structure is associated with agency theory, where some conflicts are produced, such as owner–manager conflict and controlling-noncontrolling owner conflict [
42]. The implications of the ownership disparity between shareholders are formed in two directions; the first is monitoring impact, which involves the ability of large shareholders to control managers’ decisions and thus reduce the possibility of managers harming the interests of shareholders or engaging in opportunistic behavior. The second direction is the expropriation impact, which involves the negative aspect of large shareholder–minority shareholder conflict, assuming that controlling shareholders act in their interest regardless of other owners’ interests by transforming recurses and cash flow for their private benefit, which is known as the tunneling phenomenon. In other words, ownership structure is a vital pillar of the corporate governance system [
43,
44]. Prior studies have dealt with the relationship of firm performance in the capital market and many ownership structure aspects, such as managerial ownership, institutional ownership, bank ownership, and family ownership. It must be noted that studies that have dealt with the direct relationship of marketing elements and ownership are rare in previous literature, except for [
35], who concluded that advertising expenditure contributes to an increase in the number of shareholders and thus a high ownership dispersal.
In relation to positive monitoring impact, a plethora of research proves this impact empirically. In [
45], the authors conclude on the positive effect of concentrated ownership in terms of firm value based on controlling and minority owners’ convergence of interest in the Spanish market. Along the same line, [
46] showed that funder-controlled companies perform better in the market than non-funder-controlled companies in China, where funder-concentrated ownership motivates investors by being a firewall for the company from their point of view. Additionally, the ownership percentage of the largest shareholder and the largest three shareholders correlate positively with firm value in Romania [
47].
On the other hand, other studies have reemphasized the negative expropriation impact. In [
48], the authors demonstrated that more increased control that is not coupled with good cash flows led to lower market value during the Asian crisis. The author of [
49] tested the relationship between ownership concentration measured by individually controlling shareholders’ percentages and institutionally controlling shareholders and firm value; he found that both measures push down the firm value in Switzerland. Likewise, the expropriation impact of ownership concentration in the Korean market deepens the negative R&D–firm value relationship because of controlling shareholders hindering R&D investment decisions [
50]. Meanwhile, a third line of research revealed no clear link between ownership concentration and firm performance; the authors of [
51] reported that a high level of control by family or state shareholders in Arab Gulf listed companies did not show a significant impact of ownership on the market to book ratio.
Concerning the systematic risk–ownership nexus, in the light of conflict of roles for different segments of shareholders, the existence of several controlling shareholders increases the market firm risk, while a single controlling shareholder contributes significantly to risk reduction in the USA [
52]. It was shown that companies controlled by shareholders who own diversified portfolios tend to take more risks compared with others controlled by non-diversified shareholders in Europe. The same effect was proven in the banking industry, where the controlling shareholders push toward risky decisions to increase their wealth. On the contrary, ref. [
53] documented that the ownership concentration has no impact on market risk, as measured by unexpected volatility, and performance, as measured by the TQ ratio, in Vietnam.
In essence, the variation in the results of ownership impact on value and risk is due to the characteristics of the country or region being studied regarding the level of regulatory institution development in relation to governance framework in general and particularly the degree of investor protection.
Consequently, the third and fourth hypotheses are as follows:
Hypotheses 3 (H3). Ownership concentration moderates the relationship between marketing investment and firm value.
Hypotheses 4 (H4). Ownership concentration moderates the relationship between marketing investment and firm systematic risk.
The conceptual model of the study is formed according to the literature and the hypotheses. This model is presented in
Figure 1.