Article

Journal of Marketing
2019, Vol. 83(3) 108-125
With Power Comes Responsibility: How ª American Marketing Association 2019
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DOI: 10.1177/0022242919831993
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Prevent Myopic Management

Raji Srinivasan and Nandini Ramani

Abstract
Firms sometimes engage in myopic management (e.g., cutting marketing spending, providing lenient credit to customers to
improve short-term results). Although marketing is at the center of such myopic management, there are few insights on whether a
marketing department could prevent it. To address this gap, the authors examine the role of powerful marketing departments in
preventing myopic marketing spending and revenue management. They hypothesize that there are internal and external enablers
of marketing department power (i.e., a chief executive officer with marketing experience, the firm’s power over its customers,
analyst coverage, and institutional stock ownership) that help a powerful marketing department prevent myopic management.
They test the hypotheses using a panel of 781 publicly listed U.S. firms between 2000 and 2015. As hypothesized, when the firm
has (1) a chief executive officer with a marketing background and (2) power over its customers, increasing marketing department
power decreases the likelihood of both myopic marketing spending and myopic revenue management; increasing marketing
department power and analyst coverage decreases the likelihood of myopic marketing spending. The findings highlight powerful
marketing leadership as a hitherto overlooked way to prevent myopic management and improve firm performance.

Keywords
marketing department power, myopic management, myopic marketing spending, myopic revenue management, power over
customers
Online supplement: https://doi.org/10.1177/0022242919831993

The motivation to satisfy Wall Street earnings expectations may be
overriding common sense business practices . . . where managers
cut corners. . . . We have got to break this pattern where short-
term estimates rather than long-term results drive a company’s
stock.
—Arthur Levitt, U.S. Securities and Exchange Commission,
November 16, 1998
As U.S. Securities and Exchange Commission (SEC) Chair-
man Arthur Levitt noted more than 20 years ago, managers
engage in real earnings management, changing their business
practices to emphasize short-term results at the expense of
long-term performance. For example, to increase current-
period earnings, managers may cut marketing spending or pro-
vide lenient credit terms to customers to accelerate sales from
the next fiscal year into the current year. Although marketing
activities (e.g., spending on new products, building brands and
customer relationships) are at the center of myopic manage-
ment, there are few insights on the role of the marketing depart-
ment in preventing myopic management.
There is a large body of work on myopic management
focused on myopic marketing spending—that is, the cutting
back of advertising and research-and-development (R&D)
spending. In Table 1, we provide an overview of the literature,
much of which has focused on the negative effects of myopic
marketing spending on long-term performance. Myopic mar-
keting spending (Currim, Lim, and Kim 2012; Saboo, Chakra-
varty, and Grewal 2016; Wies and Moorman 2015) decreases
firm value (Ahearne et al. 2016; Bendig et al. 2018; Chakra-
varty and Grewal 2016; Kothari, Mizik, and Roychowdhury
2015; Mizik 2010; Mizik and Jacobson 2007; Moorman et al.
2012; Saboo, Chakravarty, and Grewal 2016) and profits
(Cohen and Zarowin 2010).
Raji Srinivasan is Sam Barshop Professor of Marketing Administration, Red
McCombs School of Business, University of Texas at Austin (email: raji
.srinivasan@mccombs.utexas.edu). Nandini Ramani is a doctoral student in
Marketing, Red McCombs School of Business, University of Texas at Austin
(email: nandini.ramani@mccombs.utexas.edu).
Srinivasan and Ramani 109

Table 1. Literature Review: Marketing Leadership and Myopic Management.

Role of
Role of Myopic Myopic Other
Marketing Financial Organizational Marketing Revenue Functions CEOs’
Reference Effects Leadership Drivers Drivers Spending Management in TMT Role Context/Method

Mizik and Yes No Yes No Yes No No No Seasoned equity

Jacobson (2007) offerings
Cohen and Yes No No No Yes Yes No No Seasoned equity
Zarowin (2010) offerings
Mizik (2010) Yes No No No Yes No No No Publicly listed U.S. firms
Chakravarty and No No Yes Yes Yes No No No Publicly listed U.S. high-
Grewal (2011) tech firms
Chapman and Yes Yes Yes Yes Yes Yes No No Soup data in grocery
Steenburgh stores
(2011)
Currim, Lim, and No No No Yes Yes No No Yes Publicly listed U.S. firms
Kim (2012)
Moorman et al. Yes No Yes No Yes No No No Publicly listed and
(2012) (innovations) private U.S. firms
Wies and Yes No Yes No Yes No No No Initial public offering
Moorman (innovations)
(2015)
Kothari, Mizik, and Yes No No No Yes No No No Seasoned equity
Roychowdhury offerings
(2015)
Ahearne et al. Yes No Yes Yes Yes Yes No No Cross-country (40
(2016) countries) survey:
sales executives
Chakravarty and Yes No Yes Yes Yes No No Yes Publicly listed U.S. firms
Grewal (2016)
Saboo, Yes No No No Yes No No No Initial public offering
Chakravarty,
and Grewal
(2016)
Bendig et al. Yes No Yes Yes Yes No No No Share repurchases in
(2018) publicly listed U.S.
firms
The current study Yes Yes Yes Yes Yes Yes Yes Yes Publicly listed U.S. firms

Prior research has largely overlooked myopic revenue man-
agement, or the pulling of future revenues into the current fiscal
period by offering lenient credit terms or excessive price pro-
motions to customers. Chapman and Steenburgh (2011) and
Ahearne et al. (2016) represent two notable exceptions. Using
retail data, Chapman and Steenburgh (2011) find that myopic
revenue management through price promotions decreases stock
returns. Using a large-scale cross-country survey of firms,
Ahearne et al. (2016, p. 1240) document negative effects of
firms’ real earnings management propensities on their
performance.
We know much less about the factors that affect myopic
management, of which there are two types: financial and
organizational. As might be expected, stock market pressure
(Saboo, Chakravarty, and Grewal 2016; Wies and Moorman
2015), share repurchases (Bendig et al. 2018), past stock
returns, and volatility (Chakravarty and Grewal 2011)
increase myopic management. Organizational factors that
affect myopic management include chief executive officer
(CEO) experience and compensation, firms’ marketing and
R&D spending (Chakravarty and Grewal 2016; Currim, Lim,
and Kim 2012), and finance leadership (Ahearne et al. 2016;
Chapman and Steenburgh 2011). Prior research has primarily
focused on the factors that influence myopic marketing
spending, overlooking those of myopic revenue management
(two exceptions are Ahearne et al. [2016] and Chapman and
Steenburgh [2011]).
Marketing leadership—manifest as chief marketing offi-
cers (CMOs) (Boyd, Chandy, and Cunha 2010; Germann,
Ebbes, and Grewal 2015; Nath and Mahajan 2008), power-
ful marketing departments (Feng, Morgan, and Rego 2015),
board members with marketing experience (Whitler, Krause,
and Lehmann 2018), and a customer on the boards of
business-to-business (B2B) firms (Bommaraju et al.
2019)—improves firm performance. However, the literature
has overlooked whether marketing leadership can improve
110
firm performance by preventing myopic management. We
consider this a notable omission, as marketing strategy and
activities are at the core of myopic management. To address
this gap, we examine whether powerful marketing depart-
ments (Feng, Morgan, and Rego 2015) can prevent myopic
management. In doing so, we heed the research call issued
by Chakravarty and Grewal (2012, p. 289) for “a thorough
study of the practice [of myopic management] to understand
when and why it occurs.”
We present three features of our hypothesis development.
First, because myopic management also involves senior
finance leadership and the CEO (Ahearne et al. 2016; Jiang,
Petroni, and Wang 2010), we conceptualize the power of the
marketing department relative to the finance department. Sec-
ond, we propose that although a powerful marketing depart-
ment may intend to prevent myopic management, it will not,
by itself, be able to do so, because spending and revenue
decisions are under the purview of the CEO and the finance
department. Thus, we do not anticipate a main effect of a
powerful marketing department in preventing myopic man-
agement. Third, we theorize that other internal and external
enablers of power will help the marketing department prevent
myopic management. We hypothesize that two internal
enablers of marketing department power (the presence of a
CEO with marketing experience [“marketing CEO” herein-
after] and the firm’s power over its customers) and two exter-
nal enablers of power (analyst coverage [Yu 2008; i.e., the
number of financial analysts following the firm] and institu-
tional stock ownership [Aghion, Van Reenen, and Zingales
2013]) will help a powerful marketing department’s advocate
against myopic management.
We test the hypotheses using a panel of 5,907 firm-years of
781 publicly listed firms between 2000 and 2015. We collect
data from Standard and Poor’s Compustat database, Execu-
Comp database, I/B/E/S analyst files, and Thomson Reuters
13F Institutional Holdings Filings database. Following Mizik
(2010), we measure myopic marketing spending and myopic
revenue management respectively by noting whether there is an
unanticipated decrease (increase) in a firm’s advertising and
R&D spending (accounts receivables) when the unanticipated
change in profit is positive. Following Feng, Morgan, and Rego
(2015), we measure marketing department power using data on
firms’ top management teams (TMTs) in the ExecuComp
database.
The results, which are robust, indicate that, as expected,
marketing department power does not, by itself, affect myopic
management. However, as we hypothesize, when a firm has
both a marketing CEO and power over its customers, increas-
ing marketing department power decreases the likelihood of
both myopic marketing spending and myopic revenue manage-
ment, while increasing marketing department power and
increasing analyst coverage decrease the likelihood of myopic
marketing spending.
This article makes several findings that extend market-
ing theory. First, we contribute to the literature on myopic
management by establishing a key role for marketing
Journal of Marketing 83(3)
leadership advocacy in helping prevent both myopic mar-
keting spending and myopic revenue management. In doing
so, we show that preventing myopic behaviors is an addi-
tional mechanism by which marketing departments can
improve firm performance. Second, this research’s findings
extend the theory on subunit power (i.e., marketing depart-
ment power) by demonstrating how marketing department
power can influence firms’ strategies, depending on other
internal (a marketing CEO and the firm’s power over its
customers) and external (analyst coverage) enablers of
power.
Our findings also have high managerial relevance, because
myopic management hurts long-term performance. Moreover,
whereas myopic marketing spending is a firm’s strategic
choice, myopic revenue management is not. When the SEC
detects myopic revenue management, it considers it a violation
of generally accepted accounting principles (GAAP), resulting
in significant penalties for firms and their managers. By imple-
menting the guidelines from this research’s findings, firms can
prevent myopic management, improve firm performance, and
reduce their risk exposure.
We organize the rest of the article as follows. We first
provide an overview of myopic marketing spending and myo-
pic revenue management and develop the hypotheses. We then
describe the data and method used for hypothesis testing and
present the results of the hypothesis tests. We conclude with a
discussion of the article’s theoretical contributions, managerial
implications, and limitations and opportunities for further
research.
Myopic Management: An Overview
Under pressure from investors to improve the firm’s
current-period performance, senior managers may manipu-
late its performance through accounting-based earnings
management (discretionary accruals) and/or myopic man-
agement (real earnings management). Discretionary accruals
manipulations involve accounting changes in financial
reports (DuCharme, Malatesta, and Sefcik 2004) including,
for example, capitalizing versus expensing costs and delay-
ing write-offs. Real earnings management involves changes
in firms’ strategies including, for example, reducing adver-
tising and R&D spending and increasing trade stuffing
(Mizik 2010).
To examine the prevalence of myopic management prac-
tices, we interviewed Executive Master of Business Adminis-
tration students enrolled in a public business school in the
southern United States (n ¼ 60; average work experience ¼
8.1 years; male ¼ 70%). We found that 30% and 39% of the
managers reported that their firm had engaged in myopic mar-
keting spending and myopic revenue management, respec-
tively, when the firm’s current performance was worse than
expected. This evidence provides support for the prevalence
of myopic marketing spending and myopic revenue
management.
Srinivasan and Ramani
Myopic Marketing Spending
Per GAAP regulations, brands, new technology, new products,
and customer loyalty created by advertising and R&D spending
are not recognized as tangible assets on firms’ balance sheets.
Under current accounting rules, firms must expense R&D
spending in the fiscal period in which it occurs because its
future benefits are not certain (Financial Accounting Standards
Board 1974). Managers may expect that, by engaging in myo-
pic marketing spending (i.e., decreasing advertising, R&D, and
travel to customers), their firms’ current revenues will not
decrease but their current profits may increase and their future
performance will not suffer. Nonetheless, evidence suggests
that myopic marketing spending does decrease firm value and
profits (see Table 1).
Myopic Revenue Management
Firms sometimes engage in early revenue recognition of sales
that belong to a future period, if they occur at all (Ahearne et al.
2016; Chapman and Steenburgh 2011). Myopic revenue man-
agement can occur through multiple mechanisms, including
increased price promotions to customers and trade stuffing
(i.e., offering customers lenient credit terms to pull forward
into the current fiscal period). Myopic revenue management
through the premature sales of products is a central marketing
issue because marketing and sales departments are entrusted
with meeting sales targets. Moreover, early sales through trade
stuffing, over time, may annoy channel members and lead to
increased dissatisfaction (Herndon 2005).
The SEC considers such improper revenue recognition,
through trade stuffing, as the primary issue contributing to
financial restatements and the most frequent cause of large,
negative stock market reactions (Turner et al. 2001). Consistent
with the SEC’s position that myopic revenue management
decreases firm performance, Chapman and Steenburgh
(2011) report that myopic revenue management decreases
firms’ stock returns. Yet the extant literature has offered little
guidance on how firms can prevent it.
Specifically, the SEC considers myopic management
through trade stuffing, the focus of this research, as either
negligence or intentional manipulation and a violation of
GAAP, because it misleads investors about the firm’s financial
health. When the SEC detects myopic revenue management
through trade stuffing, there are large financial penalties for
both firms and their managers. In Table WA1 in Web Appendix
1, we provide a few high-profile examples of such myopic
revenue management found by the SEC.
Myopic Marketing Spending Versus Myopic
Revenue Management
Next, we discuss differences between myopic marketing
spending and myopic revenue management. First, the antici-
pated positive effects of myopic marketing spending and myo-
pic revenue management on firm performance in the current
111
fiscal period occur at different points in financial statements.
Myopic marketing spending enters the income statement in its
expenses, whereas myopic revenue management enters the
income statement in its revenue and enters the balance sheet
in its accounts receivables. Second, managers may expect myo-
pic marketing spending to increase profits in the current period,
without any decreases in their current-period revenues or in
future performance. In contrast, managers may expect myopic
revenue management to increase both their firm’s revenues and
profits in the current period, without any corresponding
decreases in its future performance. Third, because marketing
spending is discretionary, myopic marketing spending is a
firm’s strategic choice, with little, if any, scrutiny from regu-
lators. However, as we have noted, when the SEC detects
myopic revenue management, it is considered a fraudulent
practice.
Hypotheses
We develop hypotheses relating marketing department power
in a firm to the likelihood of myopic management. We extend
ideas from resource dependence theory positing that the power
of a department depends on the extent to which its resources
(Salancik and Pfeffer 1978) are crucial for the firm’s compet-
itive advantage. Departments with more valuable resources
have more power and greater influence on the firm’s strategy
(Hambrick and Finkelstein 1987). As Day (1997, p. 89) notes,
“Some functions will be relatively more powerful than others,
that is, they will control more resources and have more influ-
ence in the strategy dialogue.” Thus, a powerful marketing
department in a firm reflects the key role of marketing
resources (i.e., brands, channels, and customers) in its strategy
and performance (Feng, Morgan, and Rego 2015). Further-
more, a powerful finance department reflects the firm’s strong
commitment to meet investors’ expectations, as it is the finance
department, including the chief financial officer (CFO), that
manages the interface with investors (Jiang, Petroni, and Wang
2010).
Extending this logic on the roles of the marketing and
finance departments to myopic management, we present three
features of our hypothesis development. First, because myopic
management involves senior finance leadership and the CEO
(Ahearne et al. 2016; Jiang, Petroni, and Wang 2010), we con-
ceptualize the power of the marketing department relative to
the finance department. Second, because myopic management
is a complex strategic management issue involving all depart-
ments and the CEO, we do not believe that a powerful market-
ing department, by itself, can prevent myopic management.
That is, we do not anticipate a main effect of a firm’s powerful
marketing department on the likelihood of myopic manage-
ment. Third, we theorize that two internal enablers of power
(the presence of a marketing CEO and the firm’s power over its
customers) and two external enablers of power (analyst cover-
age [Yu 2008; i.e., the number of financial analysts following
the firm] and institutional stock ownership [Aghion, Van
Reenen, and Zingales 2013]) will help a powerful marketing
112
Internal Sources of Power Enablers
Marketing CEO Power over Customers
H1a–b (−)
Marketing
Department
Power
H3a–b (−)
Analyst Coverage
External Sources of Power Enablers
Figure 1. Marketing department power and myopic management.
Notes: For ease of presentation, we do not present the unhypothesized main effects of the interaction effect variables on myopic marketing spending and myopic
revenue management, which are included in the model for hypothesis testing.
department advocate against and prevent myopic management.
We provide the theoretical framework in Figure 1. We note
that, given the limited research relating marketing leadership to
myopic management, a priori, we hypothesize similar effects of
marketing department power on both myopic marketing spend-
ing and myopic revenue management.
Marketing Department Power and Marketing CEO
By virtue of their rank and experience, CEOs influence the
decision making of senior executives in different functions
in their firms (Paşa and Shugan 1996). We define a mar-
keting CEO as one who had prior marketing experience
before being appointed as a CEO. By definition, a market-
ing CEO has had considerable experience building brands,
channels, and customers and will be likely to consider the
possible long-term negative effects of myopic management,
especially on the firm’s customers and brands. However, the
marketing CEO is responsible for delivering on revenues
and earnings to investors and may feel pressure to engage
in real earnings management. Given these opposing effects,
we do not anticipate a main effect of a marketing CEO on
myopic management. Our interest is in the effect of mar-
keting department power on myopic management when the
firm has a marketing CEO.
Will the redundancy of perspectives (protecting brands,
channel partners, and customers) of a powerful marketing
department and a marketing CEO have no effect on the firm’s
myopic management? We suggest not, in light of the common
knowledge effect in the group decision-making literature
(Gigone and Hastie 1993), which argues that the influence of
an item of information in group decision making increases as
Journal of Marketing 83(3)
H2a–b (−)
Myopic Management
(a) Myopic marketing
spending
(b) Myopic revenue
management
H4a–b (−)
Institutional Stock
Ownership Control
Variables
the number of group members with knowledge of it increases.
Furthermore, the power of the marketing department is higher
when there is a marketing CEO (Verhoef and Leeflang 2009).
Thus, a marketing CEO represents an important internal
enabler of power, resulting in a powerful marketing depart-
ment’s advocacy against myopic management.
Accordingly, we propose that a powerful marketing
department will advocate for the need to build and protect
brands, channel partners, and customer relationships, com-
mon knowledge that it shares with the marketing CEO. In
such a firm, the powerful marketing department, empowered
by a marketing CEO, can effectively emphasize to their
senior colleagues, the negative effects of myopic marketing
spending and revenue management on the firm’s future per-
formance. Accordingly, we anticipate that increasing mar-
keting department power when there is a marketing CEO in
a firm will decrease the likelihood of myopic management.
Thus, we propose H1:
H1: In a firm with a marketing CEO, the higher the mar-
keting department power, the less likely it is to engage in
(a) myopic marketing spending and (b) myopic revenue
management.
Marketing Department Power and the Firm’s
Power over Its Customers
Following the definition of power in the literature (Gaski and
Nevin 1985), we define the firm’s power over its customers as
its ability to influence its customers’ behaviors. According to
resource dependence theory (Salancik and Pfeffer 1978), a
firm’s customers and their sales represent crucial resources,
Srinivasan and Ramani
essential for its performance. We are interested in the interac-
tion effect between marketing department power and the firm’s
power over its customers on the likelihood of its myopic
management.
When customers are powerful, they may impose their short-
term demands on the firm, including on investments in new
technologies that may benefit the firm but not directly benefit
the customers in the short run (Christensen and Bower 1996).
In contrast, when a firm is powerful relative to its customers, a
powerful marketing department’s long-term time horizons on
resource allocations may be more influential in arguments with
senior leaders in the firm, including in decisions related to
marketing spending and revenue management. Moreover,
when a firm has power over its customers, the greater the value
of the marketing department and the greater the marketing
department’s influence on the firm’s strategy and operations
(Moorman and Rust 1999).
In line with these arguments, we expect that when the firm
has power over its customers, increasing marketing department
power will result in more effective marketing leadership advo-
cacy against myopic management, reducing the likelihood of
its occurrence. Thus, we propose H2:
H2: In a firm that has power over its customers, the higher
the marketing department power, the less likely it is to
engage in (a) myopic marketing spending and (b) myopic
revenue management.
Marketing Department Power and Analyst Coverage
Analyst coverage refers to the number of financial analysts
who follow a firm and monitor its performance on behalf of
the firm’s shareholders (Lang and Lundholm 1996). Finan-
cial analysts, trained in finance and accounting, have spe-
cialized skills to analyze firms’ financial statements and are
domain experts in the industries of the firms that they fol-
low. These distinctive characteristics of financial analysts
qualify them to be effective monitors of firms’ reporting
and real earnings management (Yu 2008). This suggests that
analysts’ private information production and monitoring
uncovers fraud (Dyck, Morse, and Zingales 2010) and
reduces real earnings management (Yu 2008). However,
other developments in career concerns theory (Christensen
and Bower) suggest the opposite. A lack of analysts’ fore-
casts results in lower bonuses for CEOs (Matsunaga and
Park 2001). Thus, increasing analyst coverage may increase
performance pressure on the firm’s managers, leading man-
agers to engage in myopic behavior (He and Tian 2013) to
improve their firm’s current performance and their future
compensation and career prospects.
We are interested in the effect of a powerful marketing
department on myopic management when there is increasing
analyst coverage. We propose that greater monitoring from
increasing analyst coverage will increase the vigilance of
the firm’s senior management in ensuring that the firm’s
actions are not myopic. Furthermore, this increased vigi-
lance may make the senior management more receptive to
113
their powerful marketing department’s advocacy against
myopic management. Therefore, the power wielded by ana-
lysts over the firm may enable a powerful marketing depart-
ment to advocate effectively against myopic management.
Accordingly, we anticipate that increased marketing depart-
ment power, in conjunction with increasing analyst cover-
age, will reduce the likelihood of myopic management.
Thus, we propose H3:
H3: The higher a firm’s analyst coverage and higher its
marketing department power, the less likely it is to
engage in (a) myopic marketing spending and (b) myopic
revenue management.
Marketing Department Power and Institutional
Stock Ownership
A key corporate governance mechanism in U.S. publicly listed
firms is institutional ownership of a firm’s stocks, with atten-
dant governance rights for these large institutional owners of
stock (Demsetz 1986). Although institutions owned only 10%
of publicly listed firms’ stocks in 1970, by 2006, they owned
more than 60% (Aghion, Van Reenen, and Zingales 2013),
suggesting their increasing role in the corporate governance
of publicly listed firms.
While institutional investors may have different invest-
ment horizons, they demand greater information production
and transparency to ensure lower their monitoring costs and
maximize portfolio returns (Ajinkya, Bhojraj, and Sengupta
2005). Managers try to attract institutional investors who
are likely to have more power and a longer-term investment
horizon in the firm. As a result, institutional stock owner-
ship leads to greater public information production and
transparency by the firm. Furthermore, the low-cost moni-
toring resulting from such increased information production
can result in the firm’s leadership behaving in ways con-
sistent with the needs of institutional investors. This sug-
gests a negative main effect of institutional stock investors
on the likelihood of myopic management (Bushee 1998).
However, as with the main effect of analyst coverage (see
H3), there may be an opposite effect of institutional stock
ownership on myopic management. Specifically, consistent
with career concerns theory, there may be increased perfor-
mance monitoring by institutional investors, which will
raise managers’ career concerns and increase myopic
management.
We are interested in the effect of a powerful marketing
department on myopic management when there is increasing
institutional stock ownership in the firm. The greater transpar-
ency from enhanced information production, resulting from
increased institutional stock ownership, will increase the vigi-
lance of the firm’s senior leadership (Ahearne et al. 2016). In
such a firm, a powerful marketing department may effectively
advocate against myopic management. Furthermore, the
increased transparency and monitoring resulting from
increased institutional stock ownership may also make the
114
firm’s senior leadership (e.g., the finance leadership, the CEO)
more receptive to the advocacy of the powerful marketing
department against myopic management. Therefore, increasing
institutional stock ownership of a firm along with increasing
marketing department power may decrease the likelihood of
myopic management. Thus, we propose H4:
H4: The higher a firm’s institutional stock ownership and
the higher its marketing department power, the less likely
it is to engage in (a) myopic marketing spending and (b)
myopic revenue management.
Method
We test the hypotheses using data on publicly listed firms in the
United States between 2000 and 2015. We exclude financial
firms because their accounting-based performance measures do
not lend themselves to the same interpretation as those of other
firms (Ritter 1991). Furthermore, we exclude retail, utilities,
agriculture, international affairs, and nonoperating establish-
ments because the practices of myopic marketing spending and
myopic revenue management do not apply to them. We
develop measures of myopic marketing spending and revenue
management using data from Compustat annual and quarterly
databases.
We collect data on explanatory variables from multiple
secondary sources: marketing and other department powers
and executive compensation from ExecuComp database, var-
ious firm characteristics from Compustat annual database,
analyst coverage from I/B/E/S analyst details and summary
files, and institutional stock ownership data from Thomson
Reuters 13F Institutional Holdings Filings. We also collect
data from multiple sources on the functional background of
CEOs. We provide the constructs, measures, and data sources
in Table 2.
Measures
Myopic marketing spending. Following Mizik (2010), we oper-
ationalize whether a firm engages in myopic marketing spend-
ing (MY_MS) using an indicator variable. We measure
marketing spending using advertising and R&D spending
reported in Compustat. Following prior research (Chakravarty
and Grewal 2016; Mizik 2010; Saboo, Chakravarty, and Gre-
wal 2016), we compute the unanticipated profit (ROAit 
ROA d itjit1 ) and unanticipated marketing spending (MKTit 
MKT d itjit1 ) after scaling the firm’s marketing spending by its
sales (Mizik 2010). The unanticipated profit, unanticipated
R&D, and unanticipated advertising reflect the portion of the
current budget that cannot be explained by prior period bud-
gets. Following prior literature, we calculate these unantici-
pated values as residuals of the equation in which we regress
current-period values (profits, R&D, and advertising) on
previous-period values. We provide details of the estimation
approach and the results of this estimation in Web Appendix 2.
Both R&D and advertising are the firm’s annual spending
values scaled by sales (Mizik 2010). The indicator variable
Journal of Marketing 83(3)
takes on a value of 1 (0 otherwise) if the firm has higher-
than-expected profit (unanticipated profit greater than 0) and
lower-than-expected marketing spending (unanticipated adver-
tising spending less than 0 and unanticipated R&D spending
less than 0).1 We found that 15% of firm-years in the sample
engaged in myopic marketing spending, which is consistent
with Mizik’s (2010) finding of 20.7% of firm-years engaging
in myopic marketing spending.
Myopic revenue management. We operationalize whether a firm
engages in myopic revenue management (MY_RM) through
trade stuffing on the basis of the extent to which it offers
abnormally lenient credit terms to customers and/or channel
partners at the end of the fiscal year. Because firms that engage
in trade stuffing ship products to their trade partners without
receiving cash, myopic revenue management will increase the
number of days of accounts receivables. Our examination of
the business press reveals that financial analysts use the metric
of days of accounts receivables to detect trade stuffing. As
financial analyst Jason Wittes of Brean Capital noted while
commenting on trade stuffing at Osiris Therapeutics, “While
we have been cautious on the name as a result of elevated
DSO’s and extended payment terms, indicating the potential
for channel stuffing, the belated release of the recent 10-Q
gives us more concern, as it shows evidence of aggressive
accounting, particularly in regard to revenue recognition. Spe-
cifically, there are 3 restatements from distributor
relationships” (Cohen 2015).
Thus, we operationalize a firm’s trade stuffing by the
number of days of its accounts receivables in the fourth
quarter of the fiscal year scaled by fourth quarter sales,
multiplied by 91 days (AC). Again, following prior
research, we compute the firm’s unanticipated annual profit
(ROAit  ROA d itjit1 ) and its unanticipated days of accounts
receivables (ACit  ACd itjit1 ). The unanticipated profit and
unanticipated accounts receivable reflect the portion of the
current budget that prior period budgets cannot explain. We
calculate these unanticipated values as residuals of the equa-
tion in which we regress current-period values (profits and
accounts receivable) on previous-period values. Using the
accounts receivable variable calculated as shown, myopic
revenue management takes on a value of 1 (0 otherwise)
if the firm has unanticipated profit greater than 0 and unan-
ticipated accounts receivables greater than 0. More firms
(34%) in the sample engaged in myopic revenue manage-
ment than in myopic marketing spending (15%).
The ranges of the myopic marketing spending, advertis-
ing, R&D, and profits variables are comparable in size to
1
To avoid a large drop in sample size because of missing values of advertising
and R&D expenditure, we set a value of .0001 for these missing values. In our
sample, several firms that report R&D expenditures do not report advertising
expenditures. Because these firms can use their R&D expenditures to engage in
myopic management, we include them in our sample by setting missing values
to .0001. The results are robust when we set missing values of advertising and
R&D expenditures to 0, as we subsequently report.
Srinivasan and Ramani 115

Table 2. Constructs and Measures: Main Variables.

Construct Measure Data Source

Myopic marketing Indicator variable: 1 if firm’s unanticipated profit is greater than 0 and firm’s unanticipated Compustat annual data
spending (MY_MS) annual advertising and R&D spending is less than 0, and 0 otherwise
Myopic revenue Indicator variable: 1 if firm’s unanticipated profit is greater than 0 and firm’s unanticipated Compustat quarterly
management (MY_RM) accounts receivable in the fourth quarter is greater than 0, and 0 otherwise data
Marketing department As per Feng, Morgan, and Rego (2015) using the (1) proportion of marketing executives in ExecuComp data
power (MKT_DP) the TMT, (2) marketing executives’ compensation relative to the total TMT executives’
compensation, (3) hierarchical level of the highest-level marketing TMT executive’s job
title, (4) the cumulative hierarchical level of all the marketing executives in the TMT,
and (5) the number of responsibilities reflected in the marketing TMT executives’ job
titles, divided by finance department power calculated in the same manner
Marketing CEO Indicator variable: 1 if CEO has a marketing background, 0 otherwise Collected from various
(MKT_CEO) data sources
Power over customers Indicator variable: 1 if firm has no major customer, 0 otherwise Firm 10-Ks, Compustat
(PWR_CUST) segments data
Analyst coverage Natural logarithm of number of analysts covering the firm in the year I/B/E/S summary files
(AN_COV)
Firm size (SIZE) Natural logarithm of lagged total assets (annual) Compustat annual data
Firm profit (PRF) Lagged profit as measured by EBITDA/total assets Compustat annual data
Revenue growth (RG) Lagged revenue growth as measured by increase in revenue over the previous year Compustat annual data
Just beat earnings (JBE) Calculated as per Gunny (2010), based on whether a firm’s profit or change in profit (net Compustat annual data
Income/total assets) is greater or equal to 0, but less than .01
Auditor quality (AU) Indicator variable: 1 if a firm’s auditor is one of the top four auditing firms, 0 otherwise Compustat annual data
Operations CEO Indicator variable: 1 if CEO has an operations background, 0 otherwise Collected from various
(OPS_CEO) data sources
Engineering CEO Indicator variable: 1 if CEO has an engineering background, 0 otherwise Collected from various
(ENG_CEO) data sources
Other CEO (OTH_CEO) Indicator variable: 1 if CEO does not have marketing, finance, operation, or engineering Collected from various
backgrounds, 0 otherwise data sources
CEO option pay Proportion of CEO pay from options, lagged ExecuComp data
(CEO_SOP)
CEO compensation Natural logarithm of CEO’s total compensation/TMT’s total compensation, lagged ExecuComp data
(CEO_COMP)
Operations department Natural logarithm of operations department power, calculated as per Feng, Morgan, and ExecuComp data
power (OPS_DP) Rego (2015) using (1) proportion of operations executives in the TMT, (2) operations
executives’ compensation relative to the total TMT executives’ compensation, (3) the
hierarchical level of the highest-level operations TMT executive’s job title, (4) the
cumulative hierarchical level of all the operations executives in the TMT, and (5) the
number of responsibilities reflected in the operations TMT executives’ job titles, lagged
Engineering department Natural logarithm of engineering department power, calculated as per Feng, Morgan, and ExecuComp data
power (ENG_DP) Rego (2015) using (1) proportion of engineering executives in the TMT, (2) engineering
executives’ compensation relative to the total TMT executives’ compensation, (3) the
hierarchical level of the highest-level engineering TMT executive’s job title, (4) the
cumulative hierarchical level of all the engineering executives in the TMT, and (5) the
number of responsibilities reflected in the engineering TMT executives’ job titles,
lagged
Other department power Natural logarithm of 100  (marketing department power þ finance department power ExecuComp data
(OTH_DP) þ operations department power þ engineering department power), lagged
Marketing option pay Natural logarithm of average proportion of option pay in the compensation of marketing ExecuComp data
(MKT_SOP) executives in the TMT, lagged. Following prior research (Sanders and Hambrick 2007),
we calculate all option pay as a two-year average (t  1 and t  2) to reflect the fact
that options are meant to motivate behavior over multiple years.
Finance option pay Natural logarithm of average proportion of option pay in the compensation of finance ExecuComp data
(FIN_SOP) executives in the TMT, lagged
Operations option pay Natural logarithm of average proportion of option pay in the compensation of operations ExecuComp data
(OPS_SOP) executives in the TMT, lagged
Engineering option pay Natural logarithm of average proportion of option pay in the compensation of ExecuComp data
(ENG_SOP) engineering executives in the TMT, lagged
Notes: EBITDA ¼ earnings before interest, tax, depreciation, and amortization.
116
those reported in the literature (Chakravarty and Grewal
2016; Mizik 2010).
Marketing department power. Following Feng, Morgan, and
Rego (2015), we operationalize a firm’s marketing department
power using five items: (1) number of marketing executives on
the TMT (job title keywords: customer, marketing, sales,
brand, and advertising, etc.) divided by the total number of
TMT executives, (2) marketing TMT executives’ compensa-
tion relative to the compensation of all TMT executives, (3)
hierarchical level of the highest-level marketing TMT execu-
tive’s job title, (4) the cumulative hierarchical levels of all
marketing executives in the TMT, and (5) the number of
responsibilities in the marketing TMT executives’ job titles.
We scale all five items relative to the industry average (the
firm’s primary Standard Industrial Classification code). We
then combine them using principal components analysis and
scale this score between 1 and 100.
In Web Appendix 3 (Tables WA3a and WA3b), we
report details of the measures of marketing department
power. As we discussed in our theoretical development, the
finance department is primarily responsible for and actively
engaged in the firm’s real earnings management (Ahearne
et al. 2016; Jiang, Petroni, and Wang 2010), and we oper-
ationalize marketing department power relative to finance
department power (job title keywords: financial, finance,
controller, administrative, legal, investor, and accounting;
MKT_DP) (M ¼ .48, SD ¼ .61).
Marketing CEO. We obtained the names of firms’ CEOs from
the ExecuComp database to construct the marketing CEO
(MKT_CEO) variable. We collected data on CEOs’ func-
tional backgrounds from LinkedIn, Bloomberg, Equilar, and
corporate websites. We used the same job title keywords as
listed previously to ascertain evidence of the CEO’s mar-
keting experience. We classify a CEO as having a marketing
background using a dummy variable of 1 (0 otherwise) if
the CEO had marketing experience (23% of CEO-years in
the sample).
Power over customers. Firms report major customers that account
for more than 10% of their revenues. Our measure of the firm’s
power over customers (PWR_CUST) is the inverse of the mea-
sure of the customer’s power over the firm in prior literature
(Boyd, Chandy, and Cunha 2010). This indicator variable takes
on a value of 1 if the firm has no major customers (0 otherwise)
(M ¼ .42, SD ¼ .49).
Analyst coverage. We measure the firm’s analyst coverage
(AN_COV) by the natural logarithm of the mean number of
analysts following the firm in a fiscal year, obtained from the I/
B/E/S analyst details and summary files (M ¼ 2.12, SD ¼ .73).
Institutional stock ownership. We extract the firm’s institutional
stock ownership (IN_OW) from Thomson Reuters 13F Institu-
tional Holdings Filings, which contain information on institu-
tional shareholding positions. We measure institutional stock
Journal of Marketing 83(3)
ownership as the proportion of the firm’s shares held by
institutional investors at the end of the previous fiscal year
(M ¼ .76, SD ¼ .18).
Control variables. We include several control variables in the
models for hypothesis testing. We provide details of the control
variables in Table 2. We control for the firm’s size (SIZE)
measured by the logarithm of total assets and profit (PRF)
measured by the ratio of earnings before income taxes, depre-
ciation, and amortization (EBITDA) to total assets, and the
firm’s revenue growth (RG), the change in the firm’s sales over
its sales in the previous year.
We also control for whether the firm beat analysts’ earn-
ings expectations (JBE) on the basis of whether the change in
the net income scaled by assets lies between 0 and .01 (Gunny
2010); auditor quality on the basis of whether the firm’s audi-
tor is a top-four auditing firm (AU); a CEO with an operations
(OPS_CEO), engineering (ENG_CEO) or other (OTH_CEO)
background; and the CEO’s stock option pay (CEO_SOP).
We also control for the proportion of the CEO’s compensation
in the TMT total compensation (CEO_COMP), operations
department power (OPS_DP; job title keywords of manufac-
turing, plant, operations, planning, supply chain, etc.), engi-
neering department power (ENG_DP; job title keywords of
research, technology, R&D, engineering, etc.), other depart-
ment power (OTH_DP; obtained by subtracting the sum of all
other department powers from 100), marketing executives’
stock option pay (MKT_SOP), finance executives’ stock
option pay (FIN_SOP), operations executives’ stock option
pay (OPS_SOP), and engineering executives’ stock option
pay (ENG_SOP). We use the natural logarithm of department
power, proportion of CEO compensation, and department
executives’ option pay.
The final panel with data on all these variables consists of
5,907 firm-years of 781 unique firms. We provide the descrip-
tive statistics of the key variables, winsorized at 1%, in Table 3.
The correlations among the variables are low, as are the var-
iance inflation factors (all of which are below 5), assuaging
concern about threats from multicollinearity.
Model-Free Evidence: Myopic Management
and Firm Outcomes
Next, we present model-free evidence of the relationship
between myopic marketing spending and myopic revenue man-
agement and firm value, an outcome important to marketers
and C-suite executives. We expect a firm’s myopic manage-
ment behaviors to be negatively associated with its shareholder
value, which we measure through its market capitalization.
Because market capitalization may represent firm size, merely
capturing scale effects, we take its natural logarithm and sub-
tract it from the natural logarithm of the prior period’s market
capitalization.
Firms that engage in myopic marketing spending have lower
firm value compared with those that do not (.033 vs. .087,
respectively; p < .01), as do firms that engage in myopic
Srinivasan and Ramani 117

Table 3. Descriptive Statistics and Correlation Matrix of Key Variables.

Mean SD MY_MS MY_RM MKT_DP MKT_CEO PWR_CUST AN_COV IN_OW

Myopic marketing spending (MY_MS) .15 .36 1.00

Myopic revenue management (MY_RM) .34 .48 .07*** 1.00
Marketing department power (MKT_DP) .48 .61 .01 .02* 1.00
Marketing CEO (MKT_CEO) .23 .42 .01 .02 .00 1.00
Power over customers (PWR_CUST) .42 .49 .04*** .12*** .03*** .01 1.00
Analyst coverage (AN_COV) 2.12 .73 .01 .05*** .03*** .03** .05*** 1.00
Institutional stock ownership (IN_OW) .76 .18 .01 .10*** .04*** .00 .06*** .21*** 1.00
*p < .10.
**p < .05.
***p < .01.

revenue management compared with those that do not (.037 vs.
.100, respectively; p < .01). This evidence, which is consistent
with the vast empirical evidence in the literature on the harmful
effects of myopic management on firm performance, suggests
that the organizational leadership antecedents of myopic mar-
keting spending and myopic revenue management merit scho-
larly attention.
Identification Strategy
To test the hypotheses, we estimate the following equations for
firm i in year t, with the inclusion of firm-level controls and
firm fixed effects to account for unobserved firm heterogeneity
and year fixed effects to control for changes in the economic
environment. We implement the Hausman test comparing the
model estimated using a firm–fixed effects specification with
one using a random-effects specification. The Hausman test is
significant for both the myopic marketing spending (w2 ¼
70.01, p < .01) and myopic revenue management (w2 ¼
74.96, p < .01) models suggesting the appropriateness of using
firm fixed effects. We estimate the following logit models:
Myopic Marketing Spending it ¼ b 0i þ b 1 MKT DP it
þ b2 MKT CEO it þ b3 PWR CUST it þ b4 AN COV it
þ b5 IN OW it þ b6 ð MKT DP it  MKT CEO it Þ
þ b7 ð MKT DP it  PWR CUST it Þ
þ b8 ð MKT DP it  AN COV it Þ þ b9 ð MKT DP it  IN OW it Þ
þ b10 Controls it þ B t þ m it ; and ð1Þ
Myopic Revenue Management it ¼ g 0i þ g 1 MKT DP it
þ g 2 MKT CEO it þ g 3 PWR CUST it þ g 4 AN COV it
þ g 5 IN OW it þ g6 ð MKT DP it  MKT CEO it Þ
þ g 7 ð MKT DP it  PWR CUST it Þ þ g 8 ð MKT DP it  AN COV it Þ
þ g 9 ð MKT DP it  IN OW it Þ þ g 10 Controlsit þ tt þ W it : ð2Þ
b0i and g0i refer to the firm fixed effects, B t and tt refer to
the year fixed effects, b6–9 and g6–9 are the coefficients of
interest, and b10 and g10 refer to the coefficients of the control
variables. A key concern for testing the effects of a firm’s
marketing department power on its myopic marketing spending
and myopic revenue management is endogeneity (i.e., that the
explanatory independent variables of interest are correlated
with the error term).
Despite including firm-level controls and firm fixed effects,
we may not be capturing all factors that affect both a firm’s
marketing department power and its myopic management. To
overcome this endogeneity concern, we use the control func-
tion approach. We derive controls for the dependence between
the endogenous independent variables and the error term. By
including these controls in Equations 1 and 2, we ensure that
the endogenous independent variables do not correlate with the
error terms, mitigating endogeneity concerns. We do this in
two steps. First, we perform an auxiliary estimation with the
endogenous variable as the dependent variable and identify a
variable that satisfies the exclusion restriction that it correlates
with the endogenous independent variable but does correlate
with (unobserved) drivers of a firm’s myopic management.
Second, the predicted residual from the auxiliary estimation
provides a control function correction in the model used to test
the hypotheses.
We estimate five auxiliary regressions for the five indepen-
dent variables—the firm’s marketing department power, mar-
keting CEO, power over its customers, analyst coverage, and
institutional stock ownership—using as the excluded variables,
the average of all other firms (except the focal firm) in the same
four-digit Standard Industrial Classification industry for each
endogenous independent variable. There is empirical precedent
for using the industry average of an independent variable as an
excluded variable, including for marketing department power
(Feng, Morgan, and Rego 2015). The identifying assumption is
that industry levels of these independent variables are not
affected by firm-level idiosyncratic shocks and do not correlate
strongly with the residuals in Equations 1 and 2 (Lev and
Sougiannis 1996).
Theoretical developments suggest both positive and nega-
tive relationships between the key independent variables and
their respective industry averages. Neoinstitutional theory
posits that environments pressure firms to imitate other firms
to gain legitimacy (Meyer and Rowan 1977), suggesting a
positive relationship. Yet other developments in the strategy
literature (Guadalupe, Li, and Wulf 2013) suggest that firms
may try to differentiate themselves from industry peers, in
118
which case, the behaviors of the focal firm may be negatively
related to the behaviors of peer firms.
Finally, we note that industry averages of explanatory vari-
ables meet the exclusion restriction, as it is unlikely that peer
firms’ decisions relating to these variables would relate to the
focal firm’s omitted variables affecting myopic management.
The auxiliary estimations for the first stage of the control func-
tion estimation are as follows:
MKT DP it ¼ a 01i þ a11 Industry MKT DP it
þ a 21 Controlsiðt1Þ þ s 1t þ m 1it ; ð3Þ
MKT CEO it ¼ a02i þ a12 Industry MKT CEO it
þ a22 Controlsiðt1Þ þ s2t þ m2it ; ð4Þ
PWR CUST it ¼ a03i þ a13 Industry PWR CUST it
þ a23 Controlsiðt1Þ þ s3t þ m3it ; ð5Þ
AN COV it ¼ a 04i þ a14 Industry AN COV it
þ a 24 Controlsiðt1Þ þ s 4t þ m 4it ; and ð6Þ
IN OW it ¼ a05i þ a15 Industry IN OW it þ a25 Controlsiðt1Þ
þ s5t þ m 5it : ð7Þ
In Equation 3 for firm i in period t, the fixed effect a 01i
represents the firm-specific heterogeneity in marketing depart-
ment power, a11 represents the effect of industry-average mar-
keting department power (excluding the focal firm) on a firm’s
marketing department power, s1t represents the year fixed
effects, the coefficient vector a 21 represents the effects of the
control variables, and m 1it is a random error term. The same
logic applies to Equations 4, 5, 6, and 7 but for the auxiliary
regressions for marketing CEO, the firm’s power over its cus-
tomers, analyst coverage, and institutional stock ownership,
respectively.
We present the results for the auxiliary regressions for mar-
keting department power, marketing CEO, the firm’s power
over its customers, analyst coverage, and institutional stock
ownership in Columns 1–5 of Table A1 in Appendix A. As
we expected, industry-average variables are significant predic-
tors of the focal firm’s marketing department power (negative,
p < .01), marketing CEO (positive, p < .01), power over its
customers (negative, p < .01), analyst coverage (positive, p <
.01), and institutional stock ownership (positive, p < .05).
Results
To test the hypotheses, we estimate the second-stage model
with the predicted residuals from Equations 3–7. Because we
model two types of myopic management that are binary vari-
ables correlated with each other (r ¼ .07, p < .01), we simul-
taneously estimate (Morgan and Rego 2009) the following two
logit models using a seemingly unrelated estimation with
robust standard errors:
Journal of Marketing 83(3)
Myopic Marketing Spending it ¼ b0i þ b1 MKT DP it
þ b2 MKT CEO it þ b3 PWR CUST it þ b4 AN COV it
þ b5 IN OW it þ b6 ð MKT DP it  MKT CEO it Þ
þ b7 ð MKT DP it  PWR CUST it Þ þ b8 ð MKT DP it  AN COV it Þ
þ b9 ð MKT DP it  IN OW it Þ þ b10 Controls it þ b11 Wbit þ tt
þ mit ; and ð8Þ
Myopic Revenue Management ¼ g 0i þ g 1 MKT DP it
it
þ g 2 MKT CEO it þ g3 PWR CUST it þ g 4 AN COV it
þ g 5 IN OW it þ g 6 ð MKT DP it  MKT CEO it Þ
þ g 7 ð MKT DP it  PWR CUST it Þ þ g 8 ð MKT DP it  AN COV it Þ
þ g ð MKT DP it  IN OW it Þ þ g Controls it þ g Wbit þ B þ Wit ;
9 10 11 t
ð9Þ
where b0i and g0i represent firm fixed effects, tt and Bt represent
year fixed effects, b6–9 and g6–9 are the coefficients of interest,
b10 and g10 are the coefficients of the control variables, and b 11
and g11 are the effects of the five residuals in the vector W^it from
the auxiliary regressions (marketing department power, mar-
keting CEO, the firm’s power over its customers, analyst cov-
erage, and institutional stock ownership) on myopic marketing
spending and myopic revenue management. To preclude
reverse causality, we lag all control variables by one year,
excluding whether the firm just beat analysts’ earnings expec-
tations, auditor quality, and the CEO’s functional background,
because they may contemporaneously affect myopic
management.
We present the results for the models for myopic marketing
spending and myopic revenue management with only the main
effects in Columns 1 and 2 of Table 4, respectively. The results
in Column 1 indicate that, in isolation, marketing department
power has no effect on myopic marketing spending (b ¼ .233,
n.s.). The results in Column 2 indicate that, in isolation, mar-
keting department power has a marginal, negative effect on
myopic revenue management (b ¼ 1.042, p < .10).
In Column 3 of Table 4, we present the results for the
hypothesized model of myopic marketing spending. The model
fit improves with a higher likelihood ratio (LR) chi-square
statistic (LR chi-square ¼ 753.26, p < .01) over the model
with only the main effects (LR chi-square ¼ 730.88, p <
.01). In support of H1a, when there is a marketing CEO in a
firm, increasing marketing department power decreases the
likelihood of myopic marketing spending (b ¼ .555, p <
.05). As hypothesized in H2a, when the firm has power over
its customers, increasing marketing department power
decreases the likelihood of myopic marketing spending (b ¼
.384, p < .05). The results further support H3a, indicating that
increasing marketing department power in a firm and increas-
ing analyst coverage decrease the likelihood of myopic mar-
keting spending (b ¼ .252, p < .05). However, we do not find
support for H4a’s prediction that increasing marketing depart-
ment power and increasing institutional stock ownership will
decrease the likelihood of myopic marketing spending (b ¼
.276, n.s.). In terms of unhypothesized main effects of the
moderator variables, only the firm’s power over its customers
Srinivasan and Ramani 119

Table 4. Marketing Department Power and Myopic Management.

(1) (2) (3) (4)

Myopic Marketing Myopic Revenue Myopic Marketing Myopic Revenue

Spending Management Spending Management

Marketing department power  Marketing CEO (H1a–b) .555 (.277)** .499 (.232)**
Marketing department power  Power over customers(H2a–b) .384 (.171)** .305 (.144)**
Marketing department power  Analyst coverage (H3a–b) .252 (.127)** .003 (.116)
Marketing department power  Institutional stock ownership .276 (.428) .297 (.425)
(H4a–b)
Main Effects
Marketing department power .233 (.590) 1.042 (.600)* .917 (.721) .566 (.669)
Marketing CEO .095 (.159) .107 (.148) 1.278 (3.335) 3.983 (3.121)
Power over customers .127 (.174) .147 (.143) 5.240 (2.552)** 2.501 (1.954)
Analyst coverage .185 (.162) .504 (.141)*** .301 (1.123) .950 (1.013)
Institutional stock ownership .938 (.450)** .974 (.411)** 2.080 (13.083) .136 (11.939)
Controls
Firm size .510 (.151)*** .584 (.126)*** .272 (.465) .171 (.376)
Firm profit .655 (.578) .910 (.449)** 1.125 (2.068) 1.944 (1.738)
Firm revenue growth .259 (.192) .215 (.179) .207 (.243) .241 (.230)
Just beat earnings .259 (.119)** .110 (.090) .320 (.143)** .055 (.112)
Auditor quality .763 (.233)*** .193 (.178) .956 (.369)** .088 (.295)
Operations CEO .306 (.182)* .052 (.146) .099 (.307) .047 (.287)
Engineering CEO .095 (.200) .282 (.183) .152 (.460) .720 (.438)
Other CEO .006 (.186) .013 (.163) .109 (.408) .380 (.383)
CEO option pay .444 (.279) .191 (.236) .402 (.357) .132 (.327)
CEO compensation .563 (.529) .477 (.408) .456 (.767) .266 (.643)
Operations department power .015 (.071) .051 (.054) .053 (.079) .039 (.060)
Engineering department power .114 (.074) .076 (.063) .075 (.085) .038 (.074)
Other department power .024 (.120) .076 (.115) .041 (.159) .072 (.155)
Marketing option pay 1.610 (2.179) .826 (1.880) 2.447 (3.147) 3.384 (2.692)
Finance option pay .417 (1.408) 2.652 (1.235)** .325 (1.529) 1.836 (1.428)
Operations option pay 1.167 (2.323) .893 (1.876) .612 (2.803) 1.574 (2.412)
Engineering option pay 2.053 (2.278) 3.107 (2.010) 1.441 (3.759) 4.715 (3.259)
Residuals from First Stage
Marketing department power .108 (.588) 1.036 (.599)* .029 (.594) .974 (.590)*
Marketing CEO .893 (3.314) 3.626 (3.121)
Power over customers 5.359 (2.550)** 2.548 (1.952)
Analyst coverage .633 (1.163) 1.487 (1.020)
Institutional stock ownership .971 (13.109) .991 (11.952)
Firm fixed effects Yes Yes Yes Yes
Year fixed effects Yes Yes Yes Yes
Observations 5,907 5,907 5,907 5,907
Number of firms 781 781 781 781
LR chi-square 730.88 126.07 753.26 142.41
Prob > chi-square .000 .000 .000 .000
*p < .10.
**p < .05.
***p < .01.
Notes: Unstandardized parameter estimates and robust standard errors in parentheses.

decreases the likelihood of myopic marketing spending (b ¼
5.240, p < .05), which suggests that powerful marketing
departments are responsible custodians of customer relation-
ships and do not engage in myopic management when they
have power over their customers.
In Column 4 of Table 4, we present the results for the
hypothesized model of myopic revenue management. Again,
the LR chi-square statistic improves (LR chi-square ¼ 142.41,
p < .01) from the model with only the main effects (LR chi-
square ¼ 126.07, p < .01). In support of H1b, when the firm has
a marketing CEO, increasing marketing department power
decreases the likelihood of myopic revenue management (b
¼ .499, p < .05). As hypothesized in H2b, when the firm has
power over its customers, increasing marketing department
power decreases the likelihood of myopic revenue manage-
ment (b ¼ .305, p < .05). However, the results do not support
the predictions of H3b and H4b, respectively, that increasing
marketing department power decreases the likelihood of myo-
pic revenue management as either analyst coverage (b ¼
.003, n.s.) or institutional stock ownership (b ¼ .297, n.s.)
120 Journal of Marketing 83(3)

Table 5. Falsification Checks for Measure of Marketing Department Power.

Absolute Marketing Department

Power CMO Presence

(1) (2) (1) (2)

Myopic Marketing Myopic Revenue Myopic Marketing Myopic Revenue

Spending Management Spending Management

Marketing department power  Marketing CEO (H1a–b) .038 (.016)** .024 (.014)*
Marketing department power  Power over customers (H2a–b) .012 (.014) .013 (.012)
Marketing department power  Analyst coverage (H3a–b) .007 (.009) .010 (.009)
Marketing department power  Institutional stock ownership .016 (.034) .037 (.030)
(H4a–b)
CMO presence  Marketing CEO 1.065 (.610)* .685 (.649)
CMO presence  Power over customers .794 (.493) .605 (.486)
CMO presence  Analyst coverage .248 (.372) .353 (.319)
CMO presence  Institutional stock ownership .111 (1.501) .242 (1.367)
Firm fixed effects Yes Yes Yes Yes
Year fixed effects Yes Yes Yes Yes
Observations 5,944 5,944 5,944 5,944
Number of firms 787 787 787 787
LR chi-square 753.42 138.14 752.6 131.73
Prob > chi-square .000 .000 .000 .000
*p < .10.
**p < .05.
***p < .01.
Notes: Unstandardized parameter estimates and robust standard errors in parentheses. The models include variables of the main effects, control variables, and the
errors from the control function estimation, as in Table 4.

increases.2 Next, we next report additional analyses that exam-
ine the robustness of the results.
Robustness Checks
Measure of marketing department power. We first examine
whether the firm’s absolute marketing department power,
without regard to finance department power, affects its myo-
pic marketing spending and myopic revenue management.
We reestimate the models using the absolute, rather than rela-
tive (to finance), measure of marketing department power in a
firm. The results reported in Columns 1 and 2 of Table 5
support only H1.
We next examine whether the results hold with CMO pres-
ence in the firm (Nath and Mahajan 2008) instead of marketing
department power in the model. We measure CMO presence in
a firm as 1 if at least one marketing member is on the firm’s
TMT that year, and 0 otherwise. We note that the correlation
between marketing department power and the presence of a
CMO is low (r ¼ .190, p < .01). We report these results using
the CMO instead of marketing department power in Columns 3
and 4 of Table 5, which do not replicate the results in Table 4.
2
Following the suggestion of an anonymous reviewer, we examined and found
that the tests of the hypotheses are robust to the exclusion of profit and revenue
growth as control variables in the regression models.
Sampling variations. In results not reported here (available upon
request from the authors), the estimation results support H1–
H3a in a sample with the subset of firms for which advertising
and R&D spending data are reported. Also in results not
reported here, we estimate the model for hypothesis testing
on a sample of only B2B firms (Srinivasan, Lilien, and Sridhar
2011). Consistent with the results in Columns 3 and 4 of Table
4, the results support H1–H3a. Next, we estimate the model
using a sample that includes retail firms. The results support
H1 and H2 but do not support H3a. Finally, we report results
using a sample excluding observations from 2008 (during the
Great Recession). Again, consistent with results reported in
Table 4, the results support H1–H3a. Overall, the results are
robust and support the hypotheses.
General Discussion
Myopic practices can occur at all levels of the organizations—at
the very top, where resource allocation and investment decisions
are made, and at the very end of the channel, where consumer
interactions occur. (Mizik 2010, p. 596)
Myopic management occurs frequently in business practice,
negatively affects firm performance, and sometimes may be in
violation of GAAP rules. Yet prior research has overlooked the
organizational leadership drivers of myopic management and,
specifically, the role of senior marketing leadership, the focus
of this work. We conclude with a discussion of the article’s
Srinivasan and Ramani
theoretical contributions, managerial implications, and oppor-
tunities for future research.
Theoretical Contributions
First, our finding that powerful marketing departments are
effective in preventing myopic management is consistent with
Ahearne et al. (2016), who find that sales managers are respon-
sible in protecting customer accounts. Taken together, these
findings identify myopic management as a mechanism by
which powerful marketing leadership can improve firm
performance.
In a review article, Moorman and Day (2016, p. 16) argue
that while there is agreement that a strong marketing function
contributes to firm value, it would be useful to “offer a deeper
analysis of how the aforementioned mechanisms [i.e., market-
ing departments] interrelate to influence firm perfor-
mance. . . . Such an analysis could help marketing departments
identify the most promising ways to contribute to firms.” Our
research addresses their call for research and identifies contin-
gencies by which marketing department power can improve firm
performance by preventing myopic management.
Second, our findings on the contingent ability of marketing
department power to prevent myopic management highlights
the top-down effect of marketing leadership on the firms’
TMTs in improving firm performance. This finding, which
highlights the importance of marketing leadership in corporate
governance, is consistent with recent developments on the role
of marketing-experienced board members (Whitler, Krause,
and Lehmann 2018) and the presence of a customer on B2B
firms’ boards of directors (Bommaraju et al. 2019) in improv-
ing firm performance. Further research examining the effects
of senior marketing leadership (TMTs, boards of directors,
CEOs) on other firm strategies and outcomes will be useful
extensions to this work.
Third, the lack of support for the main effect of marketing
department power, absolute marketing department power, and
the presence of a CMO in the firm on preventing myopic man-
agement suggests that neither marketing department power nor
CMO presence, by themselves, do not necessarily empower
marketing department’s voice in the firm with respect to pre-
venting myopic management. There appear to be other factors
at play. We conjecture that this may be because myopic man-
agement directly affects firms’ financial performance, which is
under the purview of the CEO and the finance department.
Fourth, support for the negative interaction effects between
increasing marketing department power and (1) a marketing
CEO, (2) the firm’s power over its customers, and (3) increas-
ing analyst coverage indicate that internal and external enablers
of power can influence the power of subunits (marketing
department). These findings on the role of powerful marketing
departments extend the emergent literature on marketing lead-
ership (Feng, Morgan, and Rego 2015; Germann, Ebbes, and
Grewal 2015). The findings do not support an interaction effect
between marketing department power and institutional stock
ownership on preventing myopic management. We conjecture
121
Table 6. Effect of Marketing Department Power on Myopic
Marketing Behaviors.
Percentage Change
Drivers of Myopic Management in Probability
Marketing CEO ! Myopic marketing spending 7.13%
Marketing CEO ! Myopic revenue management 8.64%
Power over customers ! Myopic marketing 5.50%
spending
Power over customers ! Myopic revenue 6.03%
management
Analyst coverage ! Myopic marketing spending 3.94%
Notes: We compute the decrease in probability of myopic marketing spending
and myopic revenue management for a unit increase in each variable, at the
mean value of all other variables.
that this may be because marketing departments are unable to
advocate to institutional investors, who primarily liaise with
CFOs and CEOs (Bushee 1998).
Fifth, the incidence of myopic revenue management in our
sample (34%) is higher than myopic marketing spending
(15%), suggesting its widespread prevalence in practice. How-
ever, much previous research has focused on myopic marketing
spending. Against this background, our study is the first large-
scale simultaneous investigation of myopic marketing spend-
ing and myopic revenue management, providing a complete
picture of the drivers of firms’ myopic management practices.
Finally, by providing evidence on the leadership drivers of
myopic revenue management, we contribute to the literature on
the theory of myopic management (e.g., Chakravarty and Gre-
wal 2011; Mizik 2010) which has hitherto primarily focused on
the effects and drivers of myopic marketing spending, over-
looking myopic revenue management, a source of risk expo-
sure for firms and their managers.
Managerial Implications
We next examine the size of the effects of marketing depart-
ment power on myopic management behaviors to assess the
findings’ practical significance. Drawing on our parameter esti-
mates (Table 4), we compute the decrease in the likelihood of
myopic marketing spending and myopic revenue management
as marketing department power increases. These estimations
(presented in Table 6) suggest that, when the firm has a mar-
keting CEO, a unit increase in marketing department power
decreases the likelihood of myopic marketing spending by
7.13% and decreases the likelihood of myopic revenue man-
agement by 8.64%. Similarly, when the firm has power over its
customers, a unit increase in marketing department power
decreases the likelihood of myopic marketing spending by
5.50% and decreases the likelihood of myopic revenue man-
agement by 6.03%. Finally, a unit increase in marketing depart-
ment power combined with a unit increase in analyst coverage
decreases the likelihood of myopic marketing spending by
3.94%.
122 Journal of Marketing 83(3)

This study’s findings generate actionable guidelines for
senior managers aiming to prevent myopic management. First,
the findings that highlight that the responsible nature of pow-
erful marketing departments may be useful to senior marketing
executives in strengthening the case for providing marketing
managers a seat at the C-suite table.
Second, the findings suggest that a marketing CEO, the
firm’s power over its customers, and high analyst coverage can
enable powerful marketing departments to avoid myopic man-
agement. In doing so, senior marketing executives, whom some
analysts (Schwarzbach 2017) consider profligate spenders, can
actually help prevent myopic management.
Third, these findings present guidance on TMT appoint-
ments. Although TMT appointments are driven by corporate
governance considerations and not just by the need to prevent
myopic management, boards of directors can consider the ben-
efits of appointing powerful marketing executives on firms’
TMTs in helping prevent myopic management (under the con-
tingencies in the supported interactions).
Finally, myopic revenue management is in violation of
GAAP rules aimed to prevent managers from engaging in beha-
viors that distort their firms’ fiscal health and mislead inves-
tors. The SEC’s detection of trade stuffing by a firm results in
significant financial and legal penalties for the firm and its
managers. Increasing the power of the marketing department
when (1) there is a marketing CEO, (2) the firm has power over
its customers, and (3) there is high analyst coverage will pre-
vent myopic management, reducing the firm’s risk exposure.
Limitations and Opportunities for Further Research
First, in this research on marketing leadership advocacy
against myopic management, we focused on the effects of
marketing department power in conjunction with other firm
characteristics. Can marketing department advocacy increase
marketing spending to the point of diminishing returns and
result in more caution than warranted in revenue manage-
ment? Future research examining this issue would generate
insights on potential downsides of powerful marketing depart-
ments. Given the paucity of work on the organizational lead-
ership drivers of myopic management, we hypothesized
similar effects of marketing department power on both myo-
pic marketing spending and myopic revenue management.
However, because myopic marketing spending and myopic
revenue management are conceptually different, it would be
useful to develop grounded theory (e.g., interviews of senior
executives) followed by empirical testing of different drivers
of myopic marketing spending and myopic revenue manage-
ment. Moreover, in measuring the firm’s power over its cus-
tomers, following empirical precedent in the literature (Boyd,
Chandy, and Cunha 2010), we used the inverse of having a
powerful customer. Future research using more fine-grained
measures of the firm’s power over its customers would con-
stitute a useful extension to this work.
Second, a hybrid myopic management practice to increase
sales in the current period (myopic revenue management) is to
offer price discounts/sales promotions (myopic marketing
spending) (Chapman and Steenburgh 2011). However, infor-
mation on product-level price discounts/sales promotion
spending is not readily available in public databases. Future
research combining surveys of senior managers on the drivers
of myopic price discounts/sales promotion spending would be a
useful extension to this work.
Third, to test the hypotheses, we used secondary data that
precluded consideration of organizational factors (e.g., differ-
entiators vs. cost leaders). Future research relating firms’ mar-
keting strategy characteristics to myopic management, using
primary data (including surveys of senior executives) and other
downstream outcomes (e.g., patents) would be beneficial.
In conclusion, this article provides insights on the organiza-
tional contingencies of when powerful marketing leadership
can help prevent myopic management. In doing so, this
research highlights yet another mechanism—myopic manage-
ment prevention—by which marketing departments can
improve firm performance.

Appendix A

Table A1. Estimates from First Stage Control Function Regression.

Marketing Marketing Analyst Institutional Stock

Construct Department Power CEO Power over Customers Coverage Ownership

Industry average excluding focal firm .275 (.025)***a .077 (.019)*** .100 (.020)*** .159 (.014)*** .044 (.018)**
Controls
Firm size .076 (.016)*** .003 (.009) .026 (.009)*** .224 (.010)*** .026 (.004)***
Firm profit .091 (.067) .041 (.040) .069 (.039)* .407 (.042)*** .143 (.015)***
Firm revenue growth .035 (.027) .003 (.016) .009 (.016) .018 (.017) .012 (.006)**
Just beat earnings .026 (.015)* .001 (.009) .007 (.009) .018 (.009)* .006 (.003)
Auditor quality .045 (.035) .048 (.021)** .047 (.020)** .046 (.022)** .012 (.008)
Operations CEO .009 (.023) .075 (.014)*** .049 (.013)*** .023 (.014) .004 (.005)
Engineering CEO .012 (.025) .125 (.015)*** .012 (.015) .013 (.016) .005 (.006)
Other CEO .014 (.021) .110 (.013)*** .002 (.013) .016 (.014) .001 (.005)
(continued)
Srinivasan and Ramani 123

Table A1. (continued)

Marketing Marketing Analyst Institutional Stock

Construct Department Power CEO Power over Customers Coverage Ownership

CEO option pay .011 (.039) .023 (.024) .005 (.023) .020 (.025) .018 (.009)**
CEO compensation .050 (.065) .072 (.039)* .018 (.038) .047 (.041) .037 (.015)**
Operations department power .009 (.009) .001 (.005) .008 (.005) .003 (.006) .002 (.002)
Engineering department power .008 (.009) .008 (.006) .009 (.006) .005 (.006) .002 (.002)
Other department power .052 (.015)*** .031 (.009)*** .003 (.009) .021 (.010)** .000 (.003)
Marketing option pay 2.006 (.231)*** .583 (.140)*** .077 (.137) .138 (.146) .026 (.053)
Finance option pay 1.133 (.161)*** .034 (.098) .049 (.095) .492 (.102)*** .035 (.037)
Operations option pay .203 (.324) .434 (.196)** .168 (.192) .384 (.204)* .025 (.074)
Engineering option pay .033 (.331) .722 (.201)*** .218 (.196) .400 (.209)* .113 (.075)
Intercept 1.633 (.135)*** .469 (.081)*** .377 (.080)*** .249 (.090)*** .380 (.033)***
Firm fixed effects Yes Yes Yes Yes Yes
Year fixed effects Yes Yes Yes Yes Yes
Observations 6,962 6,996 6,996 6,996 6,996
Number of firms 1,081 1,083 1,083 1,083 1,083
F-statistic 21.72 7.64 4.67 47.05 53.75
Prob < F .000 .000 .000 .000 .000
Overall R-square .102 .022 .004 .533 .060

*p < .10.
**p < .05.
***p < .01.
Notes: Unstandardized parameter estimates and standard errors in parentheses.

Acknowledgments Stock and Consumer Markets,” Journal of Marketing, 82 (2),

The authors thank Kersi Antia, Rafael Becerril Arreola, Gary L.
Lilien, Manish Kacker, Leigh McAlister, Christophe Van den Bulte,
Chen Zhou, and participants at the University of Pittsburgh’s Sheth
Winter Marketing Camp for useful feedback on the research.
Associate Editor
Neil Morgan served as associate editor for this article.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to
the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, author-
ship, and/or publication of this article.
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