Brand and Firm Value: Evidence from Arab Emerging Markets

Musaab Mousa,Zoltán Zéman,Judit Sági

doi:10.3390/economies9010005

Musaab Mousa, Zoltán Zéman + Show 1 more

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https://doi.org/10.3390/economies9010005

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Abstract

This study aims to estimate the impact of brand as the most important intangible marketing asset on firm value, measured by share return in some Arab emerging market, as well analyze the moderating role of agency costs in the relationship between share return and brand. We use the Ohlson model of valuation with a sample of the most traded companies on four markets under study. The panel data regression results show a significant impact of brand on return as well as agency costs that promote the valuation model power, meaning that good corporate governance increases the degree of marketing investment efficiency in value creation. Our findings support the literature relating to the residual earnings valuation model. Furthermore, the results confirm the informative content of marketing application besides the traditional accounting figures as a promising approach for firm valuation.

Highlights

Research efforts are still underway to solve the value puzzle in the capital market as well as to determine the explanatory factors affecting share return
This study aims to estimate the impact of brand as the most important intangible marketing asset on firm value, measured by share return in some Arab emerging market, as well analyze the moderating role of agency costs in the relationship between share return and brand
Based on sample of the most traded companies in four Arabic markets, the current research adopts the Ohlson model to theorize the value relevance of marketing assets through cash flow channels, where the elements of other information in the model can bridge the gap between intangible asset valuation and its effect on investor response

Summary

Introduction

Research efforts are still underway to solve the value puzzle in the capital market as well as to determine the explanatory factors affecting share return. Corporate valuation models that explicitly include assessment of firm capabilities indicate that the marketing capabilities of the owner-managers, alongside their efforts to improve the brand value of their company, matter a lot (Littunen 2000). Two channels have been defined for the impact on firm value, the first being the indirect influence of tangible assets through increased revenues, and the second being the channel of direct influence through intangible marketing assets. Laghi et al (2020) developed market and accounting multiples for the purpose of estimating the value of brands, for assessing the (intangible) relational capital. Marketing assets create competitive resources that increase the possibility of sustainable growth and surplus performance in the long-term (Rust et al 2004)

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