Investigating Joint Effects of Brand Value and Advertising Expenditure on Corporate Financial Performance and Stock Returns

Customer-oriented and firm-oriented perspectives are two dominant perspectives adopted in brand valuation. The former is the same as the behavioral marketing approach, while the latter focuses on financial data. The study used two financially focused brand valuation methods. The first method takes into account the three dimensions of marketing, finance, and accounting, and is known as the corporate brand success (CBS) valuation. The second method employed Tobin’s q ratio for brand valuation. Finally, the authors investigated the joint effects of brand value (from both methods) and advertising expenditure on corporate financial performance and stock returns of 27 food industry companies listed in Tehran Stock Exchange, Iran. To this end, unbalanced panel data modeling was used with 378 observations for 21 years. The results confirmed the joint effect of advertising budget and brand value (from two methods) on return on assets, as an indicator of corporate financial performance. Regarding the second hypothesis, CBS valuation only confirmed the effect of brand value on stock returns. However, the entire hypothesis (i.e. the joint effect of advertising budget and brand value on stock returns) was confirmed when Tobin’s q ratio was used.