Stock price reactions to brand value announcements: Magnitude and moderators

Despite widespread acknowledgment of the importance of branding, little is known about the magnitude and the determinants of the impact of brand value on brand owners’ market value. Our paper addresses this gap in the literature by conducting an event study on the effect of brand value announcements on the stock prices of brand-owning firms. Our sample consists of 329 brand value announcements derived from Interbrand’s Best Global Brands lists. We obtain evidence of significant abnormal stock returns on brand value announcement dates, with the magnitude of stock price reactions increasing in the magnitude of brand value changes. We also formulate and test hypotheses on the moderating impact of macroeconomic conditions and brand owner characteristics on the strength of the brand value – firm value relation. We find that stockholders place less weight on brand value information during economic downturns, and more weight on brand value information provided by firms for which intangible assets are a more important part of their asset structure. Furthermore, the results indicate that stockholders put a higher value on brand value changes realized by firms that spend less on advertising.