Brand transaction announcements and stock price volatility
| Date | 26 July 2011 |
| DOI | https://doi.org/10.1108/14691931111154706 |
| Pages | 392-406 |
| Published date | 26 July 2011 |
| Author | Maria Assunta Baldini,Giovanni Liberatore,Tommaso Ridi |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Brand transaction announcements
and stock price volatility
Maria Assunta Baldini, Giovanni Liberatore and Tommaso Ridi
Department of Accounting and Management, University of Florence,
Florence, Italy
Abstract
Purpose – This paper aims to investigate the potential relationship between the stock market
announcement of a brand’s buy and sell agreement, and the stock price trend.
Design/methodology/approach – The research question was approached using a GARCH-based
statistical analysis on a sample of companies listed on the Mibtel (Italian stock exchange) that have a
brand among their assets and have undertaken a purchase/sale from 2006 to 2008.
Findings – Although the brand is believed to be an important value driver, the mere occurrence of a
purchase/sale operation for this asset only occasionally leads to a reaction in the market; at any rate,
the stock’s volatility quite rarely depends solely on such an occurrence.
Research limitations/implications – The statistical relevance of the analysis is limited by the
observational data that it was possible to analyse. In particular, to give a positive conclusion about the
influence of the brand’s buy and sell agreements on a stock’s return, it is necessary to have a time
series of a greater number of firms. A larger availability of data might, in the future, allow a more
detailed analysis and the opportunity to investigate the possible impacts of the event with relation to
the business’s characteristics – something that could not be carried out in this study because of the
aforementioned problems.
Practical implications – Researchers and practitioners are now aware that the market does not
always look upon the operations of a brand’s buy and sell agreement as value-relevant.
Originality/value – The originality of the present work lies in the fact that, to the best of one’s
knowledge, no other surveys were carried out on the chosen sample (i.e. the companies listed on the
Italian stock market); that only a few international contributions posed the same research question;
and most importantly, that the statistical methodology used can very well provide more reliable
results than regression analysis, which is normally applied to such data.
Keywords Brands, GARCH model,Volatility, Value relevance, Eventstudy, Stock prices
Paper type Research paper
1. Introduction
For many years now, intangible assets, specifically brands, have been the object of
growing concern that they represent one of the main variables for enterprise value
creation. Potentially, the availability of a brand means owning a “symbol” that
distinguishes the products/services of a company from those of competitors, in order to
ensure that it has a competitive advantage sustainable over time (Aaker, 1991).
From an accounting perspective, the role of intangibles as critical success factors for
value creation and their relation with market value have been widely investigated
(Can
˜ibano et al., 2000; Choi et al., 2000; Lev, 2001; Chalmers et al., 2008; Dahmash et al.,
2009; Oliveira et al., 2010). Brands can influence the capital’s market value, and their
revaluation can be significantly and positively correlated with stock price (Barth and
Clinch, 1998).
Applying the model suggested by Ohlson (1995), Seethamraju (2002) showed the
existence of a correlation between the market value of a company and the value
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
JIC
12,3
392
Journal of Intellectual Capital
Vol. 12 No. 3, 2011
pp. 392-406
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691931111154706
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