There are many consultancies, for example, Interbrand, Brand Finance or Batten, Barton, Durstine & Osborn (BBDO) that create annual lists of companies ranked by their brand value. Over the years, these popular rankings have become more and more relevant to companies because they are of the opinion that they can thereby increase their degree of popularity. Therefore, an interesting question arises: Is there any connection between the company’s brand value and its financial performance? The list of the one hundred most valued brands published by Interbrand, probably the most famous global branding consultancy of the world, has made its contribution to the increased popularity of brand value, not only in the United States but meanwhile also in Europe. If you peruse the best global brands 2006 list attentively, you will observe that nearly half of the
companies, exactly 49%, are non-US companies, compared to only 37% in
the year 2001. 37 of the 100 companies are from Europe, with Nokia as the most valuable European brand ranked as number six. Moreover, nine companies are based in Germany, sorted by brand value: Mercedes, BMW, SAP, Siemens, Volkswagen, adidas, Audi, Porsche, and Nivea. Further evidence for the raised acceptance and attractiveness of intangible assets, brand value included, provides the fact that since the early 1980s the share of intangible assets of concerns has increased from an average of 40% in their brand value to over 80% by the end of the 1990s. As a result, only about 20% of a company’s brand value will be recorded by the accounting system. Thus, it is difficult for the companies to explain this overvalue to the
shareholders. The first part of this paper deals with intangible assets in general.
The first part concludes with the description of the results of other empirical studies about the connection between brand value and stock performance. The second part of the working paper examines the relationship between brand value and stock performance of the EuroStoxx 50 companies. First, the empirical analysis is described, followed by the presentation of the results of the investigation. These results are then summarised and interpreted. The information criteria will be explained hereafter. Finally yet importantly, the
statistical tests based on the results of the study are summed up.
Table of Contents
Introduction
Part I. Intangible assets
1 Definition, facts and problems of intangibles
1.1 Definition of intangible assets
1.2 Facts, problems and chances of intangibles
2 Definition and accounting of brand values
2.1 Definition of brand value
2.2 Accounting abilities of brand values
2.2.1 Accounting according to IFRS
2.2.2 Accounting according to US-GAAP
2.2.3 Conclusion and outlook
3 Brand valuation methodologies
3.1 Interbrand
3.2 BBDO
3.3 Chances and limitations of the approach by BBDO
4 Existing empirical evidence
4.1 Investigation on the basis of non-financial factors
4.2 Market-to-book (MB) ratio as indicator
4.3 Analysis by the Interbrand list
4.4 Study based on different influence factors
Part II. Investigation of the relationship between brand value and financial performance
1 Empirical analysis
1.1 Goal of the present empirical investigation
1.2 Methodology and Data
1.3 Development of the brand value
1.4 Performance measurement without systematic risk
1.5 The Model
2 Results
2.1 Portfolio 1
2.2 Portfolio 2
2.3 Portfolio 3
2.4 Portfolio 4
2.5 Portfolio 5
3 Summary and interpretation of the results
4 Information criteria
5 Statistical tests
5.1 T-test
5.2 Tests for heteroskedasticity
5.2.1 White test
5.2.2 Autoregressive conditional heteroskedasticity (ARCH)
5.3 Tests for autocorrelation
Conclusion
Research Objectives and Core Themes
This thesis investigates the correlation between the brand value of companies listed in the EuroStoxx 50 index and their respective financial performance. The primary research question centers on whether a company’s high brand value acts as a reliable predictor for superior financial returns for shareholders.
- Analysis of intangible assets and the definition of brand value.
- Evaluation of common brand valuation methodologies (Interbrand and BBDO).
- Empirical assessment of the relationship between brand rankings and stock performance.
- Use of Jensen Alpha for performance measurement and portfolio benchmarking.
- Application of statistical tests to validate empirical findings and ensure unbiased results.
Excerpt from the Book
1.1 Goal of the present empirical investigation
The following study points out the influence of brands and image of a company on its financial performance. As described in the first part of this paper, it is impossible to measure and capture intangible assets correctly, especially the influence of intangibles on the financial performance. Therefore, the intangible assets are being substituted by the brand value, which represents the strength as well as the image of a company. Whereas the share price performance symbolises the concern’s financial performance.
The subsequent investigation shows the indirect influence of the brand value on the share price performance of the EuroStoxx 50 companies compared to their benchmark, the EuroStoxx 50 itself. The results should prove whether the brand value, be it a great one or not, has a positive impact on the company’s financial performance.
On the basis of the empirical results of this examination, shareholders and investors are able to decide whether it is indeed profitable to invest in companies with a great brand value or not at all.
Summary of Chapters
Introduction: Provides the motivation for the study, focusing on the rising importance of brand value and the core research question regarding its connection to financial performance.
Part I. Intangible assets: Explains the conceptual framework of intangible assets, definitions of brand value, various valuation methods, and existing empirical evidence from prior studies.
Part II. Investigation of the relationship between brand value and financial performance: Describes the methodology for constructing portfolios based on brand value, calculates performance using the Jensen Alpha model, interprets the results, and performs necessary statistical validation tests.
Conclusion: Summarizes the key findings, noting that middle-ranked brands often outperform the top-tier brands, and discusses the implications for accounting standards and future investment strategies.
Keywords
Brand value, Financial performance, EuroStoxx 50, Intangible assets, Jensen Alpha, BBDO, Interbrand, Stock returns, Portfolio analysis, Market capitalization, Shareholder value, Econometrics, Accounting standards, IFRS, US-GAAP.
Frequently Asked Questions
What is the core focus of this thesis?
The thesis examines whether there is a measurable connection between a company's brand value and its financial performance, specifically using companies within the EuroStoxx 50 index.
What are the key thematic areas addressed?
The work covers intangible assets, various brand valuation methodologies (specifically Interbrand and BBDO), empirical evidence from previous literature, and a quantitative study of portfolio performance.
What is the primary objective or research question?
The main objective is to determine if higher brand value leads to better stock price performance, ultimately advising investors whether to favor companies with high brand values.
Which scientific methods are employed?
The study utilizes a portfolio-based approach, constructing five portfolios sorted by BBDO brand value, and measures their performance relative to a benchmark using the Jensen Alpha model.
What is covered in the main body of the work?
The main body is divided into two parts: the theoretical foundations of intangible assets and brand valuation, followed by the empirical investigation, including the model construction, portfolio result analysis, and rigorous statistical testing.
Which keywords best characterize this work?
Key terms include Brand value, Financial performance, EuroStoxx 50, Jensen Alpha, Portfolio analysis, and Intangible assets.
How does the author evaluate the "best" brands?
The author uses BBDO's Brand Equity Evaluation System (BEES), which aggregates various factors like sales potential, profitability, and expert judgment to create a monetary brand value.
What is a surprising conclusion of the research?
Surprisingly, the study finds that portfolios consisting of middle-ranked companies regarding brand value often outperform the portfolios containing the "best" (top-ranked) brands, contradicting some previous expectations.
- Citar trabajo
- Christian Weiß (Autor), 2007, The influence of brands and images on the financial performance - An empirical investigation of the EuroStoxx 50, Múnich, GRIN Verlag, https://www.grin.com/document/72146
