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Brand Equity, Earnings Management, and Financial Reporting Irregularities
[Measuring brand equity across products and markets]

Author

Listed:
  • Ghada M Ismail
  • Fariz Huseynov
  • Pankaj K Jain
  • Thomas H McInish

Abstract

Owning valuable brands enhances the financial well-being of firms not only through increased revenues and profitability but also by mitigating agency problems, earnings management, and financial reporting irregularities. Firms with high brand equity are less likely to have income-inflating discretionary accruals, announce earnings restatements, or experience SEC investigations. Brand equity reduces the likelihood of manipulation through incentive and opportunity channels, which we capture in CEO characteristics and compensation, and corporate governance measures. Brand equity reduces the likelihood of financial reporting irregularities more for durable goods firms and firms with shorter-tenured CEOs, as the latter are most vulnerable to performance pressures. (JEL G31, G34, M31, M37, M41, M42)Received September 28, 2019; editorial decision May 27, 2020 by Editor Isil Erel.

Suggested Citation

  • Ghada M Ismail & Fariz Huseynov & Pankaj K Jain & Thomas H McInish, 2021. "Brand Equity, Earnings Management, and Financial Reporting Irregularities [Measuring brand equity across products and markets]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 10(2), pages 402-435.
    • Handle: RePEc:oup:rcorpf:v:10:y:2021:i:2:p:402-435.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfaa018
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    Citations

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    Cited by:

    1. Alam, Nurul & Boubaker, Sabri & Chen, Xiaomeng Charlene & Hasan, Mostafa Monzur, 2024. "Brand capital and debt choice," International Review of Financial Analysis, Elsevier, vol. 93(C).
    2. Li, Tongxia & Lu, Chun & Routledge, James, 2023. "Brand capital on debt maturity structure," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(3).
    3. David C. Mauer & Natalia Villatoro & Yilei Zhang, 2022. "Brand equity and corporate debt structure," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(7-8), pages 1077-1112, July.

    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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