Brand Values and Capital Market Valuation
Posted: 15 Jun 1998
We find that brand value estimates reported by Financial World are significantly positively related to prices and returns, incremental to other accounting variables. Concerns about brand value estimate reliability underlie lack of financial statement recognition of brands. Our findings suggest the estimates are relevant to investors and sufficiently reliable to be reflected in share prices. Simultaneous equations estimation reveals our inferences are unaffected by potential bias resulting from simultaneity between brand value estimates and equity market value. Brand value estimates also are positively associated with advertising expense, operating margin, and market share. Yet, brand value estimates provide significant explanatory power for share prices incremental to these variables, and to recognized brand assets and analysts earnings forecasts.
JEL Classification: M41, M44, G12
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