Shareholders Prefer In-Kind Element to Cause-Related Marketing Strategies, UCA College of Business Study Shows

Shareholders prefer corporations to deploy in-kind donations in place of, or in supplement to, monetary support of social causes, according to a recent study from a marketing professor at the University of Central Arkansas College of Business.

Previous studies have shown consumers react positively to corporations’ support of social causes in a strategy known as cause-related marketing. Parker Woodroof, Ph.D., assistant professor of marketing in the UCA College of Business, is the first to investigate shareholder reactions to cause-related marketing initiatives in a study published in the Journal of the Academy of Marketing Science, which found shareholders prefer in-kind donations in place of, or in addition to, monetary donations.

The study analyzed 344 announcements across 62 firms and 54 industries from companies populating Fortune’s Most Admired All-Star list between 2005 and 2017.

“Shareholders had a significant and negative reaction to the most common tactic used in cause-related marketing, which is a monetary-only donation,” said Woodroof. “Shareholders made a clear distinction between the announcement of monetary and in-kind donations.”

On the day of the announcement, stock prices fell by an average of 0.51% for companies who only gave monetarily, while those that included an in-kind donation saw stocks rise by 0.10%.

Across a six-day period ­— from two days before the announcement to three days following — stocks fell by 1.27% for companies that only gave monetarily. Alternatively, shares for companies that gave only in-kind increased by 0.47% over the event window. Companies averaged a 0.23% gain in prices when giving monetarily and in-kind.

Of the 344 announcements analyzed, 157 were monetary, 83 were in-kind and 104 mixed monetary donations with in-kind.

“Shareholders buy and sell stock based on how they perceive the future value of cash flow prospects of company investments, and they are showing they do not value monetary-only, cause-related marketing strategies,” said Woodroof. “These may seem like small percentages, but for the size of companies we analyzed, a significant and negative effect translates into millions and millions of dollars, meaning an announcement of a $5 million gift to a non-profit might cost you several million more in a sell-off.”

Incorporating in-kind contributions appears to show more commitment and improves shareholders’ perception that it is part of a well-conceived strategy, Woodroof said.

“Giving your time, through employee volunteerism, your expertise or supplies and services, signals more effort to investors and in-kind resources do not hurt the corporation’s bottom line, either,” said Woodroof.

In addition to donation type, financial resources, corporate reputation and industry played a role in mitigating the negative shareholder response. Companies in a better financial position experienced a less negative response among investors, according to the study.

“We have seen in previous studies that slack resources make companies more likely to engage in cause-related marketing,” said Woodroof. “Our study suggests investors view resource slack as the result of capable management, which gives them more confidence in corporate spending decisions.”

The overall strength of the industry also impacted investor response in the study.

“Our results showed investors perceive the potential value of resources gained through these initiatives to be most useful for firms in dynamic markets,” said Woodroof. “It may be they view it as providing their company with a competitive edge with rivals in the market.”

Woodroof led the study with co-authors George D. Deitz, Ph.D., associate professor at the University of Memphis Fogelman College of Business & Economics; Katharine M. Howie, Ph.D., assistant professor at the University of Lethbridge; and Robert D. Evans Jr., Ph.D., associate professor at the Texas A&M International University.

Woodroof came to UCA in 2016. He earned his bachelor’s in business finance from Middle Tennessee State University in 2007. He earned his Master of Business Administration in marketing from Belmont University in 2010, and his doctorate in marketing from the University of Memphis in 2015.

He is a member of the American Marketing Association, Society for Marketing Advances and Academy of Marketing Science.

The UCA College of Business is the fastest-growing college at the University of Central Arkansas with more than 1,600 undergraduate and graduate students. It offers 13 baccalaureate degrees, two master’s and one graduate certificate across four academic departments and houses the state’s only insurance and risk management program. The UCA College of Business is accredited by the Association to Advance Collegiate Schools of Business (AACSB). Visit for more.