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The impact of brand quality on shareholder wealth
journal contribution
posted on 2011-09-01, 00:00 authored by S G Bharadwaj, K R Tuli, Andre BonfrerAndre BonfrerThis study examines the impact of brand quality on three components of shareholder wealth: stock returns, systematic risk, and idiosyncratic risk. The study finds that brand quality enhances shareholder wealth insofar as unanticipated changes in brand quality are positively associated with stock returns and negatively related to changes in idiosyncratic risk. However, unanticipated changes in brand quality can also erode shareholder wealth because they have a positive association with changes in systematic risk. The study introduces a contingency theory view to the marketing-finance interface by analyzing the moderating role of two factors that are widely followed by investors. The results show an unanticipated increase (decrease) in current-period earnings enhances (depletes) the positive impact of unanticipated changes in brand quality on stock returns and mitigates (enhances) their deleterious effects on changes in systematic risk. Similarly, brand quality is more valuable for firms facing increasing competition (i.e., unanticipated decrea ses in industry concentration). The results are robust to endogeneity concerns and across alternative models. The authors conclude by discussing the nuanced implications of their findings for shareholder wealth, reporting brand quality to investors, and its use in employee evaluation.
History
Journal
Journal of marketingVolume
75Issue
5Pagination
88 - 104Publisher
American Marketing AssociationLocation
Chicago, Ill.Publisher DOI
ISSN
0022-2429eISSN
1547-7185Language
engPublication classification
C Journal article; C1.1 Refereed article in a scholarly journalCopyright notice
2011, American Marketing AssociationUsage metrics
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