Dimensions of Strong Brand and Risk: Based on a Liquidity-Augmented Capital Asset Pricing Model

Hyo-Youn Chu
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Hyo-Youn Chu: Hyo-Youn Chu is Assistant Professor at Kyung Hee University, Department of International Studies, Seoul, Korea. E-mail: hychu7@khu.ac.kr

Global Business Review, 2013, vol. 14, issue 2, 283-296

Abstract: This article investigates the trade-off of developing a brand facing a firm. Establishing the brand on the one hand reduces liquidity (subjective) risk perceived by investors through effective marketing, but on the other hand increases market (objective) risk through incurring a substantial advertising expenditure to accumulate intangible assets. I estimate the model parameters using a new liquidity-augmented Capital Asset Pricing Model developed by Liu ( 2006 ). I find that as advertising expenditure increases, the brand lowers liquidity risk associated with perceived risk by consumers and investors, but increases market risk associated with asset-market structure. Although the impact through which the role of brands operated differed somewhat across industry characteristics, I find that the general impact of brand contribution is empirically plausible across the firm products.

Keywords: Capital Asset Pricing Model; Brand; advertising expenditure; capital expenditure; asset value (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:14:y:2013:i:2:p:283-296

DOI: 10.1177/0972150913477503

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