The Information Content of Brand Equity Measures

In this study, we investigate the information content of Brand Equity measures. Previous literature suggests that brand equity measures may be more relevant than financial information in managing business unit performance. Capitalizing on a unique data set, we examine whether specific brand equity measures are associated with contemporaneous and/or future accounting performance. Our results indicate that the relative information content of brand equity components is lower than the relative information content of previous year financial performance. This result defies claims that brand equity measures are better performance measures in explaining contemporaneous and/or future accounting performance than accounting performance measures from previous years. However, our results also indicate that specific brand equity measures provide incremental information to the information provided by accounting performance. Including specific brand equity measures in the compensation contracts of business unit managers may therefore increase managerial effort. Our research findings provide additional insights for marketing managers and general managers that want to target specific aspects of accounting performance, as well as for those responsible for the design of performance measurement systems and/or incentive contracts.

Contact information:

Peter Roosenboom

Email