Impact of Brand Value on Financial Performance of Banks: An Empirical Study on Indian Banks

Abstract

Purpose: The biggest challenge for the banking industry is to tangibilize the intangible banking experience. One way of overcoming this challenge is creation of strong brands. It has been well recognized that Brands are regarded as most important corporate asset but recently serious attempts have been made by various organizations in order to estimate their brand value (Farquhar, 1989). Academic literature has revealed that high brand value resulted in increased financial returns and shareholder value, which leads to superior financial performance. This research focuses on the investigating the impact of brand value on various financial indicators on of banks. Design/ Methodology/Approach: The investigation is designed as a quantitative study and is based on the brand value of Indian banks. The sampling frame constituted Top 10 banks listed by Brand Finance, a leading brand valuation agency. Five banks were selected on the basis of highest brand values reported in Brand Finance Banking 500, (2014) from Public sector as well as Private sector banks. In public sector banks, State Bank of India, Punjab national bank, Bank of Baroda, Bank of India and Canara bank were selected. Amongst private sector banks, ICICI, HDFC, Axis, Kotak Mahindra and Yes bank form the sample of the study. The data of Brand values were collected from the report of Brand Finance Banking 500 published during 2009-2014. Multiple Regression analysis has been applied in order to analyze the impact of Brand value on various financial indicators such as Return on Assets (ROA), Return on equity (ROE), Return on Investments (ROI), Stock Prices and Earnings Per share (EPS). Findings: The findings revealed that Brand value has significant impact on the financial performance of banks. Brand value has significant negative impact on ROA, ROI and ROE. This negative phenomenon indicates the marginal diminishing returns of the bank's brand advantage, ceteris paribus (Tsai and Chang, 2012) whereas brand value has significant positive impact on Stock Prices and EPS. Originality/Value: This is the most comprehensive quantitative study in the field of branding and financial performance of the banking sector. There has been limited research on the impact of brand value on the financial performance of banks. This study provides new insights for marketing managers and brand valuation agencies.