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Dimensions of Strong Brand and Risk: Based on a Liquidity-Augmented Capital Asset Pricing Model

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  • Hyo-Youn Chu

    (Hyo-Youn Chu is Assistant Professor at Kyung Hee University, Department of International Studies, Seoul, Korea. E-mail: hychu7@khu.ac.kr)

Abstract

This article investigates the trade-off of developing a brand facing a firm. Establishing the brand on the one hand reduces liquidity (subjective) risk perceived by investors through effective marketing, but on the other hand increases market (objective) risk through incurring a substantial advertising expenditure to accumulate intangible assets. I estimate the model parameters using a new liquidity-augmented Capital Asset Pricing Model developed by Liu ( 2006 ). I find that as advertising expenditure increases, the brand lowers liquidity risk associated with perceived risk by consumers and investors, but increases market risk associated with asset-market structure. Although the impact through which the role of brands operated differed somewhat across industry characteristics, I find that the general impact of brand contribution is empirically plausible across the firm products.

Suggested Citation

  • Hyo-Youn Chu, 2013. "Dimensions of Strong Brand and Risk: Based on a Liquidity-Augmented Capital Asset Pricing Model," Global Business Review, International Management Institute, vol. 14(2), pages 283-296, June.
    • Handle: RePEc:sae:globus:v:14:y:2013:i:2:p:283-296
    DOI: 10.1177/0972150913477503
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    References listed on IDEAS

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    Cited by:

    1. Sudhakara Reddy Syamala & Yogesh Chauhan & Kavita Wadhwa, 2014. "Institutional Investors and Stock Liquidity: Evidence from Indian Stock Market," Global Business Review, International Management Institute, vol. 15(3), pages 461-476, September.

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