Corporate brand value and cash holdings

摘要

This research devotes theoretical and empirical attention to the understudied relationship between corporate brand value and cash holdings. We draw on existing firm valuation theorizing at the marketing-finance interface to propose that branding can alter the probability distribution of the firm's revenues, lower potential operating shortfalls (negative operating earnings), and thereby reduce the firm's cash holdings. The negative corporate brand value-cash holdings relationship is empirically tested using Brand Finance's brand valuation metric as the predictor. Based on a pooled cross-section time-series design of up to 115 firms across 10 years, we find: that (1) support for the predicted negative association between brand value and cash holdings and (2) that the long-term cash holdings elasticity of brand value is between -0.16 and - 0.22. Interestingly, these results are not replicated when using a traditional consumer-based brand equity measure. This study informs the debate on whether and how brand assets can impact firm cash holdings, reaffirms that results are sensitive to the operationalization of brand assets, and recognizes a new role for brands-as a “downside risk" (not variance) management tool for the top management team. An overarching implication of this research is that brands should be viewed as a firm-wide strategic asset with a sphere of influence that transcends the marketing function.