Purpose In the digital era, firm-retail investor interaction has been proven to play a vital role in corporate strategies, yet how it will affect firms' marketing investment remains unknown. This study aims to explore the effect of firm-retail investor interaction on marketing investment and examine the moderating role of digital transformation in this relationship. Design/methodology/approach Employing a sample of Chinese A-share listed firms from 2010 to 2022, this study employs ordinary least squares (OLS) regression as the primary estimation method. It further introduces interaction terms related to digital transformation to test the moderating effect, conducts heterogeneity analysis based on retail investors' tone and firms' response timeliness, and investigates the underlying mechanisms. Findings The results indicate that the higher the quality of firm-retail investor interaction, the lower the marketing investment. Moreover, this negative effect is mitigated by the firm's digital transformation. Alleviating corporate agency problems and stimulating retail investors' purchase intention serve as the underlying mechanisms through which firm-retail investor interaction affects marketing investment. When retail investors' inquiries carry a negative tone or firms provide timely replies, this effect becomes more pronounced. Originality/value This study advances agency theory by revealing that retail investors' influence in corporate governance has been enhanced in the digital era. It clarifies the mechanisms and boundary conditions under which firm-retail investor interaction influences marketing investment. It also provides insights for motivating retail investor engagement, guiding firms to refine their investor communication strategies, and assisting regulators in improving their supervisory frameworks.
Wang et al. (Mon,) studied this question.