Brand Equity Information on Earnings Calls – Impact on Firm Value

• Applicant: Professor Dr. Alexander Himme
• Subject Area: Management and Marketing
• Term: since 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 513555020

The overarching aim of this project is to analyze the role that brand equity information plays on earnings calls. Previous research has demonstrated that earnings calls are an important tool to disclose information to investors and financial analysts that enable them to better judge the future financial development of firms. This project aims at generating a better understanding which brand equity information is discussed on earnings calls and to what extent it provides valuable information to the financial community. Three questions form each an independent subproject: 1) Talking about brand equity and does it matter? It is investigated the frequency of occurrence and under which conditions brand equity-related content is discussed on earnings calls. Frameworks that systematically categorize brand equity content are used to identify brand equity content on earnings calls via text mining. The conditions under which this content is presented are determined (e.g., backward- versus future-oriented information; valence). Earnings calls are also examined over a longer timeframe of ten years to derive trends. Various anteceding factors will be identified that may trigger the brand equity content discussions (e.g., business development). Based on the text mining results it is analyzed how investors react to brand equity information on earnings calls. Given that this information is provided during a specific timeframe during a day, the analysis will be based on intraday stock market returns. 2) How to measure the extent and quality of brand equity information disclosure on earnings calls? The second subproject has the aim to aggregate the extent of the disclosed brand equity information and to measure its quality. A disclosure index shall be developed that combines the identified brand equity content from the first subproject with externally provided brand equity information. Determining similarities or contradictions between internal and external evaluations of brand equity shall lead to an assessment regarding the quality of the provided information. The disclosure index shall be used as a moderator of the main effect of brand equity information on earnings calls on firm value, i.e., it shall be examined to what extent the breadth and quality of the provided information influences this main effect. 3) Do analysts benefit from brand equity information? It is analyzed if financial analysts benefit from brand equity content discussions on earnings calls. If such discussions are important, then greater quantity of such information will lower analysts’ uncertainty about future cash flows. As a result, they should be able to leverage all valuable information to update forecasts more timely and achieve more accurate earnings forecasts. Since brand equity information needs to be thoroughly processed and viewed in contrast to pure financial information, it is relevant to consider the role of analyst’s expertise in terms of forecast accuracy improvement.

• DFG Programme: Research Grants
• International Connection: France
• Co-Investigators: Professor Dr. Marc Fischer; Professor Dr. Henrik Leopold
• Cooperation Partner: Professor Abhishek Borah, Ph.D.