The (Apparent) Usefulness of Brand Values for Predicting Cash Flows and Earnings

51 Pages Posted: 20 Oct 2022

See all articles by Marie Dutordoir

Marie Dutordoir

University of Manchester - Manchester Business School

Oliver Hegers

University of Amsterdam

Joao Quariguasi Frota Neto

University of Manchester - Alliance Manchester Business School

Frank Verbeeten

University of Amsterdam - Faculty of Economics and Business, Amsterdam Business School

Date Written: October 18, 2022

Abstract

We evaluate the extent to which brand value can help forecast cash flows and earnings. We rely on brand values of publicly-listed U.S. firms, as estimated by brand consultancy firms Interbrand, Brand Finance and BrandZ between 2006 and 2021. While in-sample regressions suggest a positive incremental impact of brand value estimates (BVE) on future cash flows and earnings, out-of-sample predictions based on linear regressions and Machine Learning methods show that BVE have no additional forecasting power over standard accounting information. An analysis of abnormal returns on zero-cost portfolios based on forecasted cash flow and earnings performance supports this conclusion. Our findings contribute to discussions on the balance sheet recognition and managerial relevance of brand values. Moreover, our results demonstrate the importance of relying on out-of-sample predictions when judging the incremental information content of intangible assets.

Keywords: Brand value, intangible assets, forecasting ability, out-of-sample, Machine Learning, cash flows, earnings

Suggested Citation

Dutordoir, Marie and Hegers, Oliver and Quariguasi Frota Neto, Joao and Verbeeten, Frank H.M., The (Apparent) Usefulness of Brand Values for Predicting Cash Flows and Earnings (October 18, 2022). Available at SSRN: https://ssrn.com/abstract=4251854 or http://dx.doi.org/10.2139/ssrn.4251854

Marie Dutordoir (Contact Author)

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Oliver Hegers

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Joao Quariguasi Frota Neto

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Frank H.M. Verbeeten

University of Amsterdam - Faculty of Economics and Business, Amsterdam Business School ( email )

Plantage Muidergracht 12
Amsterdam, 1018TV
Netherlands
(+31)0205257391 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
44
Abstract Views
154
PlumX Metrics