The Impact of Brand Quality on Shareholder Wealth

  • Bharadwaj S
  • Tuli K
  • Bonfrer A
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Abstract

Abstract This study examines the impact of brand quality on three components of shareholder wealth: stock returns, systematic risk, and idiosyncratic risk. The study finds that brand quality enhances shareholder wealth insofar as unanticipated changes in brand quality are positively associated with stock returns and negatively related to changes in idiosyncratic risk. However, unanticipated changes in brand quality can also erode shareholder wealth because they have a positive association with changes in systematic risk. The study introduces a contingency theory view to the marketing–finance interface by analyzing the moderating role of two factors that are widely followed by investors. The results show an unanticipated increase (decrease) in current-period earnings enhances (depletes) the positive impact of unanticipated changes in brand quality on stock returns and mitigates (enhances) their deleterious effects on changes in systematic risk. Similarly, brand quality is more valuable for firms facing inc...

Author-supplied keywords

  • brand quality
  • earnings
  • idiosyncratic risk
  • industry concentration
  • marketing
  • stock returns
  • systematic risk

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Authors

  • Sundar G Bharadwaj

  • Kapil R Tuli

  • Andre Bonfrer

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