Journal of Strategic Marketing

An article on
Marketing and bankruptcy risk: the role of marketing
capabilities
 01 Introduction
TS
CONTEN 02 Empirics

03 Controls

04 Results
01 INTRODUCTION
Definitions of variables
01 02

Marketing
capabilities
bankruptcy
bankruptcy is the inability to pay o ff
marketing capability is the
debtors and is precipitated chiefly due
efficiency and effectiveness with
to falling revenues, often due to
which the marketing function
exogenous factors beyond the firm’s
contributes to firm value while
control.
using marketing resources.
Conceptual Background

Time Time Time

(Jorion & Zhang, 2009) (Zingales, 1998) (Dichev, 1998)

Accounting Role in Contributions to

and finance determining its the marketing
bankruptcy risk literature
literature
Research questions
01
What are the conditions under
which a firm’s marketing assets
reduce its bankruptcy risk?

02
What is the effect of market
capability on bankruptcy?
02 EMPIRICS
Research objectives

01
To identify the conditions under which a firm’s
marketing assets reduce its bankruptcy risk.

02
To find out the effect of market capability on
bankruptcy
variables

Bankruptcy risk Marketing capabilities

liquidity profitability

Marketing assets Market growth

Hypothesis

H1
Marketing capabilities reduce firms’
bankruptcy risk.

H2
Interaction between a firm’s marketing
capability and marketing assets reduces
the risk of bankruptcy.
Data sources

Combination of Firm level bankruptcy Accounting data

capabilities and assets data

Continuous variables Database of lynn M.

data lopucki
Measure of variables

Dependent variable
 Bankruptcy

Independent variable
 Marketing Capabilities
 CONTROLS
03
 Controls

For R&D, we use the Market growth refers to

same lag structure as the degree demand
01 used in obtaining 03 grows in a specific
marketing assets to industry

Firm size RsD assets Turbulence Market growth

We use the book Industry turbulence

value of the firm’s refers to the degree
assets to account
02 that industry demand 04
for firm size shifts rapidly and
unpredictably

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 Controls

05 06 07 08

Competitive profitability Leverage

intensity
Liquidity
Competitive intensity the ratio of earnings We measure leverage as We measure
refers to the degree to
which a firm faces before interest and taxes a firm’s total debt liquidity as the ratio of
competition in a to total assets divided by its book working capital to total
market
value of assets assets.
Research Model
Hazard model
We apply a hazard model introduced
by Shumway (2001) and employ a hazard function
that allows us to investigate the effect of various
factors on bankruptcy risk

hit = Pr(Ti = t|Ti ≥ t; xit)

 RESULTS
04
Results

Provide greater reduction in

1
bankruptcy risk

H1
Acceptance 2 Low marketing capabilities

Combination of high capability

3 and low marketing assets
Additional results

Impact bankruptcy

Calculate Operation capability use cost

frontier model

Cost of goods sold (output)

inventories ,gross plant, property and
equipment (input)

R&D capabilities (output)

R&D expenses (input)
Additional results

Findings
Only marketing and not R&D and
operation capabilities that reduce
the probability of bankruptcy and
other results stay unchanged.
Discussions and implications

Marketing capabilities Accounting for marketing data Marketing capabilities

Reduces a firm’s can improve the predictive Increases a firm’s
bankruptcy risk accuracy of bankruptcy models. short term cash flow
Limitations and Future Research

Greater marketing capabilities Potentially

differentiate firms enough from competitors 01
Greater marketing capabilities Allow a firm to
build and maintain strong market base asset 02
This study does not consider the market conditions
in which the firms operate 03
THANK YOU