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Getting what you’re worth: Implications that affect firm value in a brand acquisition

Author

Listed:
  • Monica B. Fine

    (Coastal Carolina University)

  • Kimberly Gleason

    (University of Pittsburgh)

  • Desi Budeva

    (Ramapo College of New Jersey)

Abstract

To enhance brand equity, firms can deploy different marketing communication elements, such as advertising, promotions, and sponsorships, which create brand awareness (i.e., recall and recognition) and ultimately positive, unique associations. Instead of starting from scratch, though, companies often prefer to avoid costly development by acquiring existing brands. Prior research, however, has indicated that acquiring firms suffer from a “winner’s curse,” which results from the information asymmetries inherent in valuing intangible assets. Drawing from established marketing and finance literature theory and methods, in this paper we provide evidence regarding how equity markets perceive brand acquisition strategies, and whether these strategies reduce the acquirers’ perceived risk relative to a control sample of firms. Our results suggest that shareholders view brand acquisitions, unlike other intangible asset acquisitions, as fairly valued. Yet, the market appears to value brand acquisitions differently based on the brand’s characteristics, which also affect performance after acquisition. Furthermore, we document a decline in systematic risk following brand acquisitions.

Suggested Citation

  • Monica B. Fine & Kimberly Gleason & Desi Budeva, 2016. "Getting what you’re worth: Implications that affect firm value in a brand acquisition," Journal of Brand Management, Palgrave Macmillan, vol. 23(5), pages 70-96, September.
  • Handle: RePEc:pal:jobman:v:23:y:2016:i:5:d:10.1057_s41262-016-0006-4
    DOI: 10.1057/s41262-016-0006-4
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    Cited by:

    1. Pramod Iyer & Arezoo Davari & Audhesh Paswan, 2018. "Determinants of brand performance: the role of internal branding," Journal of Brand Management, Palgrave Macmillan, vol. 25(3), pages 202-216, May.
    2. Jiemiao Chen & Robert E. Smith, 2018. "The boundaries for ad creativity: effects of type of divergence and brand processing and responses," Journal of Brand Management, Palgrave Macmillan, vol. 25(6), pages 561-576, November.
    3. Shaun M. Powell, 2016. "Journal of Brand Management – Year end review 2016," Journal of Brand Management, Palgrave Macmillan, vol. 23(6), pages 601-611, November.

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