Corporate Brand Thrust and Financial Performance: An Examination of Strategic Brand Investments

Abstract

A powerful brand is generally considered an effective way of generating shareholder wealth, but how is it actually measured and controlled? Today, there is still no empirical evidence of a link between a company's "brand thrust" (i.e., the amount of financial resources a company allocates over time to build its brand) and the financial return achieved by the company. This paper establishes an empirical link between brand thrust and financial return, whereby 2,158 companies within 11 different industries were analyzed in terms of their investments in supporting, developing, or maintaining their brand, against their return on assets or equity. The total sample size comprises over 10,300 corporations listed on U.S. and European stock exchanges. This study reveals that companies with a balanced corporate brand thrust, compared to their competitors, on average bring up to a three-percentage-point higher return to their shareholders. Furthermore, for the companies studied, the link between brand thrust and financial return can be described as a W-curve with five distinct strategic phases rather than a linear function.