The Impact of Brand Rating Dispersion on Firm Value

Journal of Marketing Research, vol. L (June 2013), 399-415.

59 Pages Posted: 3 May 2013 Last revised: 21 Dec 2016

See all articles by Xueming Luo

Xueming Luo

Temple University

Sascha Raithel

Ludwig Maximilians University of Munich - Munich School of Management

Michael Wiles

Arizona State University (ASU) - Marketing Department

Date Written: April 30, 2013

Abstract

This study examines brand dispersion — variance in brand ratings across consumers — and its role in the translation of brand assets into firm value. Dispersion captures the covert heterogeneity in evaluations of brands among consumers who like or dislike the brands, which would affect an investor’s decision to buy or sell a stock. The higher the dispersion, the more inconsistent and polarized cross-consumer ratings of the brands. Multiple analyses — from simple, model-free to time-series models — on 730,818 brand-day observations provide robust evidence that changes in brand dispersion matter for stock prices. Brand dispersion has Januslike effects: it harms returns but reduces firm risk. Further, downside dispersion has a stronger impact on abnormal returns than upside dispersion, indicating an asymmetry in brand dispersion’s effects. Moreover, dispersion tempers the risk-reduction benefits of higher brand rating in both short and long runs. Without modeling dispersion, brand rating’s impact on firm value can be over- or under-estimated. Managers should consider dispersion a vital brand-management metric and add this metric to the brand-performance dashboard.

Keywords: Brand, Brand Performance, Rating, Dispersion, Firm Performance

JEL Classification: M21, M31, G00, G12, L86, M00, M30, M14

Suggested Citation

Luo, Xueming and Raithel, Sascha and Wiles, Michael, The Impact of Brand Rating Dispersion on Firm Value (April 30, 2013). Journal of Marketing Research, vol. L (June 2013), 399-415.. Available at SSRN: https://ssrn.com/abstract=2258607

Xueming Luo (Contact Author)

Temple University ( email )

1810 N. 13th Street
Floor 2
Philadelphia, PA 19128
United States

HOME PAGE: http://www.fox.temple.edu/mcm_people/xueming-luo/

Sascha Raithel

Ludwig Maximilians University of Munich - Munich School of Management ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Michael Wiles

Arizona State University (ASU) - Marketing Department ( email )

Tempe, AZ 85287-4106
United States

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