Impact of Brand Building Activities on the Shareholder’s value in Indian context

Abstract

The importance of intangible assets has increased tremendously in the recent period. The significant influence of these intangibles on the shareholders value has been empirically proved and well documented for the developed economies. In our paper we try to examine the effect of brand building activities on shareholder’s value in Indian context using dynamic panel data model. We use advertisement and R&D expenditure as proxy for brand building activities and market value of equity and profits as a proxy for shareholders value. Our study reveals a significant influence of these spending on shareholder’s value on contemporaneous and temporal basis, but the effect of these spending when compared to the developed markets is muted and we also observe higher effect of advertising than the Research and Development as expenditure on R&D is comparatively less in India and R&D is much more risky than the advertisements. Our study based on the division of the data into large and small cap reveals a non uniform effect of advertising and R&D on large cap and small cap stocks. R&D and Advertising expenditure has a significant and profound effect on the large cap companies, where as the effect is subdued in case of a small cap companies