The Performance of Global Brands in the 2008 Financial Crisis: A Test of Two Brand Value Measures

Abstract

Previous literature has argued that high brand equity helps stabilize financial returns and reduce share price volatility. This research investigates how some of the strongest brands in the U.S. market fared in terms of financial performance during the Fall 2008 stock market downturn. Initial results using a financially based measure of brand value (Interbrand) show that, counter to expectations, these top brands did not outperform the market as a whole. However, the findings are in the hypothesized direction when an alternative, consumer-based brand equity measure (EquiTrend) is used to replicate the analysis. After first employing the three Fama-French factors to evaluate stock performance, we assess the added brand equity effect using both aforementioned measures. The customer-based measure shows a significant incremental effect on stock performance, helping explain more variance than the classic Fama-French model alone accounts for. Furthermore, this positive effect on returns holds even when controlling for financial fundamentals and also applies to stock volatility and firm betas. None of these effects hold for the financially-based measure.