Browsing by Subject "Corporations--Valuation"

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The effects of advertising and publicity on corporate reputation and sales revenue: 1985-2005
(2007) Kim, Kyung-ran; Drumwright, Minette E.
With the increasing call for accountability of significant marketing communication spending, quantifying and measuring the contribution of marketing communication to market performance is increasingly a requirement for sustainability in all management practices. In addition, the resource-based view (RBV) suggests that a firm's marketing communication creates intangible market-based assets and that these assets strengthen a firm's market and financial performance. Recent developments of the market-based assets theory focus on corporate reputation as an intangible market-based asset, suggesting that a favorable reputation is an intangible asset that increases a firm's performance. This study examined the effect of advertising and publicity on corporate reputation and market performance and hypothesized that a firm's advertising and publicity generated favorable corporate reputations and high levels of sales revenues in certain firms. Hypotheses were tested by a time-series analysis using the panel data of 18 companies over a 21-year period from 1985 to 2005. The results indicated that advertising and publicity have significant effects on corporate reputation for certain companies. Other variables, such as a firm's dividend yield to investors, market value, diversification, and profitability were significantly related to assessments of corporate reputation for certain companies, but the direction of the relationship varied from company to company. For example, as expected, low dividend yields induce high assessments of corporate reputation for certain companies. A firm's current market value also affects assessments of a firm's reputation. More diversified companies yield lower corporate reputations for certain companies. Regarding the relationship between marketing communication and sales revenues, advertising and publicity have significant effects on sales revenues for some companies. A firm's R&D expenditures, the focus of the firm, and firm size also showed a significant positive relevance to sales revenues for certain companies.
An examination of investors' use of nonfinancial measures
(2004) Jackson, Kevin Edward; Koonce, Lisa Lynn
In this dissertation, I examine investors’ use of nonfinancial measures (e.g., customer satisfaction) on two dimensions. First, I consider the relevance of nonfinancial measures for investors and introduce a prescriptive four-step model for using such measures in conducting fundamental valuation. A model that articulates how investors can use nonfinancial measures is important because such measures can provide forwardlooking information that is not available from traditional accounting measures. However, nonfinancial measures only benefit investors if they can interpret and integrate the measures with other available information. Performing these tasks with nonfinancial measures is difficult for investors because they observe nonfinancial measures presented in a variety of ways, as no standards currently exist regarding such disclosures. The model provides a framework for investors to realize the benefits of using nonfinanical measures by articulating a process that facilitates interpreting and integrating these measures to make investment-related judgments in the current financial reporting environment. My dissertation also considers investors’ judgment problems associated with observing nonfinancial measures presented in various ways. Specifically, I conduct an experiment to investigate judgment problems that investors encounter when they observe nonfinancial measures presented using different scales (i.e., nominal, ordinal, interval, or ratio). My results provide evidence that investors rely more on a nonfinancial measure when its scale matches the scale the investor uses for his judgment, at the expense of an equally relevant measure whose scale does not match his judgment scale (termed a scale compatibility effect). Importantly, the effect exists in investors’ valuation-related judgments (e.g., assessments of price-earnings multiples). My results also show that the scale compatibility effect is reduced when investors evaluate several values for nonfinancial measures simultaneously. Implications of these results are discussed.
Exploring the impact of advertising on brand equity and shareholder value
(2004) Jeong, Jaeseok; Drumwright, Minette E.
The primary objective of this research was to test whether advertising can contribute directly to brand equity and indirectly to shareholder value and, if it can, determine how much value advertising can deliver to brands and firms. If advertising can play a key role in developing and maintaining brand equity and shareholder value, it should be considered an investment rather than an expense. Mainstream advertising effectiveness research has traditionally focused on the relationship between advertising and market performance measures such as sales volume and market share. Even though this approach has produced interesting findings on how advertising works or should work, its contributions to our knowledge about the role of advertising in a competitive, complicated, and ever-changing market environment has been limited. The present research employed a conceptual framework by Srivastava and his colleagues (1998) in order to address posited relationships between advertising, R&D, brand equity, and shareholder value. Using secondary data from various industry and academic sources during a ten-year time span, simple and multiple regression analyses were performed in conjunction with path analyses to evaluate the posited relationships. The findings of the research showed that advertising can not only work to improve market performance measures but also to develop and maintain brands. R&D was also found to positively affect brand equity by presumably enhancing a firm’s intellectual market-based assets. With regard to the relative effectiveness of advertising and R&D, expenditures on R&D were more effective than expenditures on advertising in contributing to brand equity when measuring absolute effects of expenditures. When measuring changes in brand equity, however, changes in advertising were more effective than changes in R&D. Thus, R&D can be more important than advertising in contributing to the total value of brand equity, but advertising can be more effective than R&D in contributing to the marginal value of brand equity.