Serv Bus(2012)6:459–471
DOI10.1007/s11628-012-0156-8
O R I G I N A L A R T I C L E
The value relevance of brand equity in thefinancial rvices industry:an empirical analysis using quantile regression
David Han-Min Wang•Tiffany Hui-Kuang Yu•
Fang-Ru Ye
Received:10July2012/Accepted:10July2012/Published online:20July2012
ÓSpringer-Verlag2012
Abstract The purpo of this article is twofold.First,it attempts to explore the factors contributing to the brand values of Taiwan’sfinancial rvice companies. Second,it aims to examine the value relevance of their brand equity.Our empirical findings from OLS regression show that advertising expenditure in ban
kingfirms have positive significant effects on brand evaluation and that the brand equity of bankingfirms is positively related to their market value.The generalfindings remain valid when we apply conditional quantile regressions to re-examine the relationships.Moreover,the quantile estimates indicate that the factor of brand loyalty could bring benefits to the banks with lower levels of brand equity.How-ever,brands do not offer insights into the banks that have extremely low market capitalization.
暴跳如雷
Keywords Brand equityÁBrand expansionÁBrand loyaltyÁValue relevance
1Introduction
After the study by Aaker(1991),many rearchers(Aaker1996,1997;Kerin and Sethuraman1998;Yoo et al.2000;Doyle2001;Mizik and Jacobson2008)have claimed that the nature of brand awareness,brand image,brand loyalty,and their D.H.-M.Wang(&)
Department of Accounting,Feng Chia University,Taichung,Taiwan
e-mail:hmwang@fcu.edu.tw
T.H.-K.Yu
Department of Public Finance,Feng Chia University,Taichung,Taiwan
教师党员承诺书e-mail:hkyu@fcu.edu.tw
F.-R.Ye
Contract Division,Chaoyang Life Insurance Company,Taichung,Taiwan
e-mail:
460 D.H.-M.Wang et al. measurements are important determinants offirm value.They have generally concluded that company brands reprent the future economic value of asts which can create wealth for shareholders.
Although there is growing recognition that brands are important intangible asts, companies are still faced with challenges to substantiate the brand value in clear financial terms.Srivastava et al.(1998)argued thatfirms have intangible asts or undertake branding strategies benefits of which are not properly identified, measured,and recognized in theirfinancial statements.For example,the accounting standards IAS38,SFAS142,and SFAS37issued by the International Accounting Standards Board(IASB),the United States Financial Accounting Standards Board (FASB),and the Tai
wan Financial Accounting Standards Committee(FASC)state that internally generated intangible asts such as brands should not be recognized as asts in the company’s balance sheet.
By comparing the market capitalization and the Interbrand value of the top10 brands in2001,Ambler(2003)found that the brand reprents between18and 68%of the market value of thefirm.Ballow et al.(2004)indicated that traditional accounting asts for the S&P500companies in2002explain only in respect of 25%of market value,compared to80%in1980.Fehle et al.(2008)also asrted that the best brands have hidden values,not priced by conventional ast-pricing models.The studies suggested that business are becoming less dependent on physical asts for value creation and look more cloly at the value of intangible asts include brands.
The rvice industry is one of the greatest driving forces behind economic growth in many countries.Denby-Jones(1995)and Jones(1999)indicated that branding in financial rvices is undergoing tremendous changes,owing to the dramatic increa in competition following the deregulation movement of the late twentieth century. For example,after Taiwan’s government pasd the‘‘Commercial Bank Establish-ment Principle’’in1991,banks in Taiwan were substantially deregulated,and thus the number of banks had incread from18to50over the next10years.In such a competitive environment,banks in Taiwan have been pursuing non-pricing marketing,such as brandin
g,as a fundamental strategy.
Recent studies(Benrud2004;O’Loughlin and Szmigin2005;de Chernatony and Cottam2006;Dawes et al.2009;Petruzzellis et al.2011)have indicated that the role of brand considerations in thefinancial rvices market is growing in importance.However,there has been a lack of empirical examination of the drivers and the value relevance of brand equity forfinancial rvicesfirms.Bowen and Ford (2002)and Reed and Storrud-Barnes(2009)argued that the differences between rvice and manufacturing drivers of performance required different management skills.Moreover,empiricalfindings regarding the relationship between brand equity,and its key drivers are mixed.Kamel et al.(1999)and Yoo et al.(2000) showed that,in the long term,advertising expenditure has positive effects on brand equity while promotions have negative effects.Similar results were found for the factor of brand extension.While there are a number of potential benefits associated with brand extensions,there is the possibility that the extension could harm the equity which has been developed by the parent brand(Loken and John1993;John et al.1998).This article,therefore,us both conventional ordinary least squares
啄木鸟简笔画The value relevance of brand equity461 (OLS)and quantile regressions to examine the branding relationship dynamics.In particular,this study aims to explore variations in the factors contributing to t
he brand values of bankingfirms in Taiwan and the value relevance of their brand equity.Ourfindings would improve our knowledge and understanding of the brand equity infinancial rvices.
The remainder of the article is organized as follows.Section2reviews literature on brand value.Rearch methods are then prented,followed by empirical results and discussion.The conclusions are given in thefinal ction.
2Literature review
Brands are defined in many ways,but the common point is that brand names come from the root of consumers’knowledge(Keller1993,1997;Aaker1996).The concept of brand equity began to be ud widely in the1980s and can be described as the value a brand name adds to a product(Farquhar1989;Winters1991; Chaudhuri1995;Aaker1996).Although main accounting standards tting bodies in the world do not recognize brands as accounting asts,branding is often considered as an important factor of corporate success and a driver of competitive advantage.Therefore,the understanding,interpretation,and measurement of brand equity indicators are crucial for asssing thefinancial value of brands.
There are various types of marketing and/orfinancial paradigms developed to contemplate the brand
value.However,the marketing or integrated model,such as the Interbrand model,has been criticized for its proprietary analytic framework and the various subjective parameters employed(Chu and Keh2006).The Hiro model,developed by Japan’s Ministry of Economy,Trade and Industry,determines brand value on the basis of publicfinancial data and tends to be more objective compared to other appraisal methodologies(Hiro2002).Therefore,this study applies the Hiro model in valuation analysis.And our literature review on brand value will focus on the brand factors related to the Hiro methodology.
The Hiro methodology for asssing brand value encompass three elements: brand prestige,brand loyalty,and brand extension.Ackerberg(2001)found that advertiments which provide consumers with product information can create prestige or image effects of products.Hoch and Ha(1986)and Smith(1993)argued that advertising can mitigate the negative effects on consumer attitude of a poor product experience or an ambiguous product trial.Brand-bad advertising can strategically create a comparative advantage forfirms through its ability to differentiate their products and/or rvices from tho of competitors.Advertising can also be viewed as an entry barrier,which may discourage some potential competitors from entering an advertising-intensive market and maintain the established brand loyalty of the incumbent(Chaudhuri2002;Mizik and Jacobson 2003;Ho et al.2005).
Brand Loyalty,the cond driver of the Hiro valuation model,is a crucial goal and result of successful marketing programs.Aaker(1991),Dick and Basu(1994), Reichheld(1996),and Chaudhuri and Holbrook(2001)suggested that brand loyalty can provide companies with considerable marketing benefits,including lower
462 D.H.-M.Wang et al. marketing costs,better trade leverage,greater market share,and higher price premiums,which have been cloly associated with brand equity.Many other ,Ambler2000;Ailawadi et al.2003;de Chernatony et al.2004; Slotegraaf and Pauwels2008)also justified the role of brand loyalty and pointed out that high brand equity is associated with brand loyalty.
While the importance of brand loyalty has been recognized by academic rearchers,brand loyalty is equally espoud by marketing practitioners.de Chernatony et al.(1998)showed that,among brand consultants,brand loyalty is the most frequently cited consumer-bad criterion for evaluating brand success. Ambler(2000)also indicated that brand loyalty is the most important metric for asssing marketing performance and has positive associations with brand equity. Thefindings support Aaker’s(1991)argument that the brand loyalty of the customer ba reprents the core of a brand’s equity.
The third driver of the Hiro model is brand extension,which is the capability of extending a brand from its traditional market to a broader geographic market or distribution channel.Brand extensions have been shown to have various effects on parent brand beliefs and attitudes and have the potential to either dilute or enhance parent brand equity.Springen and Miller(1990)reported that brand extension has become an increasingly popular way of gaining growth.Aaker(1991)argued that a successful extension can increa parent brand sales and enhance brand equity by reinforcing the core product’s brand image.de Ruyter and Wetzels(2000)and del R’io et al.(2001)showed that the positive associations with the parent brand can be transferred to the sub-brands which lead to favorable brand extension evaluation.
与虎谋皮的意思After examining the factors that differentiate between successful and unsuccess-ful brand extensions,Park et al.(1991)revealed that the most favorable consumer reaction can be expected for prestige-oriented brand names when brand extension and core brand have high concept consistency.However,Gibson(1990)warned that even successful repeated extensions might diminish or exhaust a core product’s brand equity.Sullivan(1990)and Loken and John(1993)argued that brand extension may produce negative effects on brand equity if brand extension is unsuccessful.In addition,John et al.(1998)indicated thatflagship products are less likely to be diluted by unsuccessful brand extensions than the parent brand name.
Many studies have reported a link between corporate branding andfinancial performance.Simon and Sullivan(1993)developed a marketplace metric to measure brand value and demonstrated that brand equity compris a large proportion of afirm’s replacement value.Aaker and Jacobson(1994)posited that high brand equity levels derived from product quality can lead to higher consumer preferences and stock returns.Kerin and Sethuraman(1998)assdfirms on the 1995and1996Interbrand’s list and reported a positive relationship between brand values and market-to-book ratios.Barth et al.(1998)also found that the Interbrand values are significantly and positively related to stock prices and returns.Kallapur and Kwan(2004)showed that brand asts recognized by UKfirms are value relevant,despite managers’incentives to overvalue them.Through a comprehensive meta-analysis in business literature,Conchar et al.(2005)provided evidence of a significant positive relationship between brand-building activities and thefirm’s market value.
Bad on the literature review above,we can provide testable hypothes that brand prestige,brand loyalty,and brand extension could affect brand equity and therefore might impact thefirm’s market value.
3Rearch methods
In this article,we begin by using the Hiro valuation model,discusd in the previous ction,to estimate the brand values of our sample bankingfirms.The Hiro model can be summarized as follows.The brand value(BV)is assumed to be the function of three key factors:
BV=fðPD;LD;ED;rÞ¼PD
r
ÂLDÂEDð1Þ
The implied factors or drivers in the valuation model are prestige driver(PD), loyalty driver(LD),and extension driver(ED),and,r is the risk-free interest (discount)rate.
The PD is reprented by the cashflows attributable to the price advantage or excess value of the brand.The proportion of advertising expen and promotion cost,or brand management cost,to total operation expens is ud as the brand attribution rate.Formally,PD is given by
PD¼1
5
X0
i¼À4
s i
c i
冬季防火À
sÃ
i
cÃ
i
Â
AD i
OE i
&'
ÂC0ð2Þ
where
S Sales or interest revenue of banks;
形容骄傲的成语C Cost of sales or interest expen of banks;
S*Sales or interest revenue of a benchmark company;
C*Cost of sales or interest expen of a benchmark company;
AD Advertising expen and promotion cost;and
OE Total operation expens.
Hiro’s cond key parameter,loyalty driver(LD),is a factor related to the capability of a brand that
manages to maintain stable sales over a long period bad on the premi of customer loyalty and repeat business.The LD is constructed by calculating the stability of the cost of sales and can be measured by the following formula:
LD¼l cÀr c
奢侈表l c
金融英文
ð3Þ
where
l c Five-year average of cost of sales or interest expen of banks;and
r c Five-year standard deviation of cost of sales or interest expen of banks.
The ED is the third key factor of the Hiro model.The ED determines the brand’s expansion capability which reprents a well-recognized brand that can The value relevance of brand equity463
