Brand perception, cash flow stability, and financial policy

Yelena Larkin

Journal of Financial Economics, 2013, vol. 110, issue 1, 232-253

Abstract: This paper demonstrates that intangible assets play an important role in financial policy. Using a proprietary database of consumer brand evaluation, I show that positive consumer attitude toward a firm's products alleviates financial frictions and provides additional net debt capacity, as measured by higher leverage and lower cash holdings. Brand perception affects financial policy through reducing overall firm riskiness, as strong consumer evaluations translate into lower future cash flow volatility as well as higher credit ratings for potentially volatile firms. The impact of brand is stronger among small firms, contradicting a number of reverse causality and omitted variables explanations.

Keywords: Financial policy; Capital structure; Cash flow volatility; Cash holdings; Brand (search for similar items in EconPapers)
JEL-codes: G30 G32 L15 M31 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:110:y:2013:i:1:p:232-253

DOI: 10.1016/j.jfineco.2013.05.002

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