Are companies that are seen as safe investments also seen as safe brands?

Abstract

In the highly competitive scenario a company’s most valuable intangible asset is its Brands. Managers of several successful companies over the past decade have selected brand development as a top priority (Keller & Lehmann, 2006).Aaker defines brand equity as the set of brand assets and liabilities attached to the brand (like its name and symbols) which would add or subtract value from a product or service.The major five properties for analysing brand equity are brand loyalty, brand-name awareness, perceived brand quality, favourable brand symbolism and associations and other propriety assets which provide competitive advantage. Brand equity is important for generating future earnings streams by providing competitive edge. In past, many researchers have argued that successful branding is more likely to result in tangible outcomes because firms with strong brand equity can more easily expand demand for their products (or services) through brand extensions and internationalization. In past decades, few private brand consulting firms have emerged which quantitatively assess the value of prominent brands and represent them into annual rankings. Interbrand, founded in 1947, has gained quite popularity in this regard. The firm declared global brands ranking in 1999 for first time and since then, it is considered the market leader for brand valuations due to the long experience. As per 2014 ranking lists, no Indian brand has made to the top hundred global brands. Although, Interbrand’s the top 40 most valuable brand of 2014 list places TATA, Reliance and Airtel as the top three most valued brands of India. Researchers claimed that brand valuations published by independent firms reliably reflect in share prices. Brand value estimates are positively related to prices and returns and also with advertising expense, operating margin, and market share (Barth et al., 1998).Madden et al. (2006) research study on American brands provide empirical evidence that strong brands deliver greater returns to stock-holders as compared to the relevant benchmark with less risk. The latest research by Feng et al. (2013) examines the relationship between brand value and corporate performance. Prudent investors prefer to hold stocks in established companies, and track corporate performance using indicators like profitability, brand awareness, R&D and advertising intensity. For company’s management brand value is an important tool and can be used effectively in assessing company’s performance and risk. The present research analyses the other side of the equation of brand value and investment. The idea under testing is to check if brands which are considered safe investments are also viewed as safe brands to use from consumers aspects. Here, research try to understand the relation between stock performances of well-known Indian brands with the consumer’s buying behavior. In India, many people have preferred to invest in public sector firms rather than private ones. This is because PSUs have government backing and hence, are perceived as safer, investor friendly investments. But in current market scenario, this is not good enough reason. Government arbitrary behaviour, acting without taking care of the minority shareholder interest, negative news on policy paralysis, corporate governance and environmental clog are reasons which caused stocks of PSUs bleeding. Meagre dividends paid by these firms are due to government mandate. The Bombay Stock Exchange PSU index has lost 21 per cent in last one year, while the National Stock Exchange benchmark Nifty went down by 11 per cent. Many banking stocks, major chunk of PSU basket, have fallen sharply and State Bank of India (SBI) has lost 17 per cent.In this context, the research also tries to answer the question