The Value Relevance and Reliability of Brand Assets Recognized by U.K. Firms

Kallapur, S and Kwan, S Y S (2004) The Value Relevance and Reliability of Brand Assets Recognized by U.K. Firms. The Accounting Review, 79 (1). pp. 151-172.

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Abstract

We examine the value relevance and reliability of brand assets recognized by 33 U.K. firms, and the stock price reaction to the announcement of brand capitalization. We find that brand assets are value relevant, i.e., associated with market values. However, the market capitalization rates of brands of firms with low contracting incentives are higher than those of firms with high contracting incentives to capitalize and overstate brand values. Thus, there could be substantial differences in the extent of bias or error in brand valuations of firms with different levels of contracting incentives, i.e., brand asset measures might not be reliable. The stock price reaction during the 21 days surrounding the first announcement of brand recognition is significantly positively associated with the recognized brand amount. However, the brand coefficient is only a small fraction of what would be expected if markets did not impute any value to brands before firms recognized them. Few previous value‐relevance studies have examined intangible assets recognized in financial statements, and none have examined the effects of contracting incentives on the reliability of the reported values of intangible assets.

Affiliation: Indian School of Business
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ISB Creators
ORCiD
Kallapur, S
https://orcid.org/0000-0003-2920-6144
Item Type: Article
Additional Information: The research article was published by the author with the affiliation of Purdue University.
Uncontrolled Keywords: brand assets, intangible assets, contracting incentives, value relevance, reliability
Subjects: Business and Management
Depositing User: Veeramani R
Date Deposited: 05 Mar 2019 10:21
Last Modified: 13 Mar 2019 09:13
URI: http://eprints.exchange.isb.edu/id/eprint/663
Publisher URL: https://doi.org/10.2308/accr.2004.79.1.151
Publisher OA policy: http://www.sherpa.ac.uk/romeo/issn/0001-4826/
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