Valuing Branded Businesses
Journal of Marketing, Forthcoming
43 Pages Posted: 23 Apr 2008 Last revised: 14 Aug 2011
Date Written: November 15, 2008
Abstract
We present an approach for valuing branded businesses that enhances traditional multiplier-based valuation approaches by explicitly incorporating brand characteristics into the model. Empirical analysis indicates that valuation accuracy can be significantly improved by incorporating information about the properties of the firm's brand asset into a valuation framework. We find that brand metrics have statistically significant associations with valuation multipliers and add incremental explanatory power to accounting variables in explaining valuation multipliers. Out-of-sample analysis shows a 16% improvement in the mean absolute error for predictions taking into account brand metrics compared to predictions based on accounting variables alone.
Keywords: relative valuation, valuation multipliers, brand, intangible assests
JEL Classification: M31, M41
Suggested Citation: Suggested Citation
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