Brand equity and stock performance in time of crisis: evidence from the COVID-19 pandemic

Abstract

Purpose This paper aims to investigate the impact of brand equity (BE) on stock performance (i.e. stock return, volatility and beta), and compare the performance of a high brand equity stocks (HBES) portfolio with that of the overall market during market downturn, market upturn and total disturbance periods of the COVID-19 pandemic in 2020. Design/methodology/approach Stock performance data and brand valuation estimates are obtained from various sources to assemble a portfolio of HBES and conduct the analyses. Econometric models are estimated to examine the impact of BE on stock performance and compare the HBES portfolio performance versus the overall market. Findings BE was positively associated with stock return and negatively associated with both types of risk (volatility and beta) during the COVID-19 pandemic. Specifically, during the market downturn period, BE was positively related to stock return and negatively related to stock volatility; during the market upturn period, BE was negatively associated with both types of risk; and during the total disturbance period, BE was positively associated with stock return and negatively associated with both types of risk. Finally, the HBES portfolio outperformed the market (S&P 500 index). Research limitations/implications The findings advance the extant research by providing evidence pertaining to brands' role in mitigating the impact of unpredictable market shocks and crises, such as the COVID-19 pandemic, on stock performance. While brands are mostly viewed as drivers of sustained competitive advantage and profitability, their protective role in crisis times is noteworthy. Practical implications The research findings potentially help marketing and brand managers to justify marketing spending and craft their strategies to enhance firm performance during crises similar to COVID-19. Originality/value The marketing–finance interface can benefit from insights offered by the COVID-19 pandemic, as such crises are becoming prevalent and are capable of damaging various stakeholders' outcomes (firms, investors and customers). The empirical examination is separately conducted on the market downturn, market upturn and total disturbance period attributable to the COVID-19 pandemic.

Brand communications during a global crisis: understanding persuasion intent, perceived brand opportunism and message sincerity

“…As a global crisis, COVID-19 serves as a crucial example of understanding how brands can effectively engage consumers during crisis contexts and offers insights applicable to other crises. A recent study showcased the positive influence of brand equity on stock performance during the pandemic, underscoring the proactive role of branding in times of crisis (Farhang et al, 2023). It was also found that crisis-related brand messages were more effective for consumers with lower social connection during the pandemic (Garcia-Collart, 2023).…”

Brand equity and company performance: evidence from a quasi-experiment in an emerging market

“…Many researchers have already studied the relationship between brand equity and financial performance, by using rankings of valuable brands, such as Billet et al (2014), Fehle et al (2008, Johansson et al (2012), Madden et al (2006), Voss and Mohan (2016), Oliveira et al (2018) and Farhang et al (2023), who conducted surveys to compare the financial performance of a portfolio composed of companies classified as most valuable brands with a market portfolio of other companies listed on the stock exchange. In general, these studies have shown that a portfolio of companies that develop valuable brands presents higher returns than market portfolios.…”

“…(2006), Voss and Mohan (2016), Oliveira et al. (2018) and Farhang et al. (2023), who conducted surveys to compare the financial performance of a portfolio composed of companies classified as most valuable brands with a market portfolio of other companies listed on the stock exchange.…”

Are you alright brand equity? Analysis of the top 100 global brands during COVID-19 outbreaks

“…The chosen theory relates to this study because brand equity is an intangible resource that can improve a company's competitive advantage (Chaudhry and Ramakrishnan, 2019). Other past and recent studies that also incorporated this theory are found the work of Balis (2020), Cooper et al (2023), Farhang et al (2023) and He and Estebanez (2023).…”