Brands Matter: An Empirical Demonstration of the Creation of Shareholder Value Through Brands

31 Pages Posted: 1 Nov 2002  

Thomas Madden

University of South Carolina - Darla Moore School of Business

Frank Fehle

BlueCrest Capital

Susan Fournier

Boston University

Date Written: May 2, 2002

Abstract

Past research has shown a correlation between measures of brand equity and stock price. However, these results are not sufficient to conclude that branding creates shareholder value. Using time-honored models from the discipline of finance, this paper specifies, and subsequently tests, the necessary and sufficient conditions to determine whether brand strength leads to the creation of shareholder value. The results presented extend previous research by showing that strong brands not only deliver greater returns to stockholders versus a relevant market benchmark, they do so with less risk. A reframing of brand research within the framework of risk management is recommended, toward a goal of greater organizational interdependence and accountability for the marketing function as a whole.

Keywords: brands, branding, marketing metrics, marketing productivity, return on investment, marketing and finance, return on brand building investments

JEL Classification: M300

Suggested Citation

Madden, Thomas and Fehle, Frank and Fournier, Susan, Brands Matter: An Empirical Demonstration of the Creation of Shareholder Value Through Brands (May 2, 2002). Available at SSRN: https://ssrn.com/abstract=346953 or http://dx.doi.org/10.2139/ssrn.346953

Thomas Madden (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-777-4784 (Phone)
803-777-6876 (Fax)

Frank Rudolf Fehle

BlueCrest Capital ( email )

40 Grosvenor Place
London, SW1X 7AW
United Kingdom

Susan Fournier

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
617 353 2773 (Phone)

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