Determining the relationship between the brand value and financial ratios, and evaluation of the status of brand value in financial tables within the framework of the Turkish accounting standards

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Cevdet A. Kayali


Brand value is generated depending on the value attributed to the brand by consumers and indicating the financial strength of the brand as well as company over others. With the widespread acquisitions and mergers since the 1980s, appraisal of brand accurately value has become quite important. The methods developed to determine the true monetary value of brands are classified into three groups: financial-based, behaviour-based and combined appraisal models. Financial models determine the brand value based on financial data such as royalty paid for the brand and price premiums created by the brand. Financial appraisal methods do not take into account customer behaviours and preferences that is criticised to be shortcoming of this method. In order to eliminate this shortcoming, behaviour-based appraisal models have been developed. The behaviour-based models provide an assessment of the brand from the customer’s perspective. However, they do not bring a distinct methodology to translate appraisal elements influencing brand value in monetary terms. On the other hand, the combined appraisal models which utilise the methodologies employed by both financial and behaviour-based appraisal models assess brand value by considering both financial and non-financial criteria. In this study, brief information on methods developed to calculate the brand value, which is of great importance for companies, is given. The relationship between brand value and financial variables of net sales, EBIT-earnings before interest and tax, total assets and total equity is tested through panel data analysis. For this analysis, 100 companies with most valuable brands listed in Brand Finance Annual Reports in Turkey were studied and 20 companies with complete and accurate financial data between the years 2011 and 2015 were included in analysis. Findings revealed a significant and positive relationship between brand value and financial parameters of net sales and total assets. However, no significant relationship is found between brand value and financial parameters of EBIT and total equity.

Keywords: Brand value, intangible assets, financial ratios


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