Brand Capital and Firm Value
Ohio State University (OSU) - Fisher College of Business
University of Minnesota; National Bureau of Economic Research (NBER)
Maria Ana Vitorino
University of Minnesota - Carlson School of Management
March 15, 2012
We study the role of brand capital - a primary form of intangible capital - for firm valuation and risk in the cross-section of publicly traded firms. Using a novel empirical measure of brand capital stock constructed from firm level advertising expenditures data, we estimate that the value of the brand capital stock represents about 30% of firms’ market value. In addition, we show that: firms with high brand capital investment rates underperform firms with low brand capital investment rates by 7% per annum; more brand capital intensive firms outperform less brand capital intensive firms by 4.1% per annum; and investment in both brand capital and physical capital is volatile, has positive but low autocorrelation, and is strongly procyclical. A neoclassical investment-based model augmented with brand capital simultaneously matches the asset pricing facts and the time-series properties of firm-level brand capital and physical capital investment. Our findings highlight the importance of brand capital for understanding firms’ market value and risk.
Number of Pages in PDF File: 56
Keywords: intangible capital, q-theory, cross-section of stock returns
JEL Classification: G12, G14, E32working papers series
Date posted: March 18, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo8 in 1.250 seconds