International Journal of Business & Applied Sciences Vol. 10 No. 1, pp. 1-6 (2021) ISSN: 2165-8072 (Online); 2471-8858 (Print) IJBAS Vol. 10 No. 1 (2021) The Impact of Co-branding on Firm Stock Value Murong Miao, Junzhou Zhang, Tianfu Wang* Co-branding has become a widely used marketing strategy, yet little attention has been paid to its impact on a firm’s stock value. Prior literature has shown that using a co-branding strategy properly helps firms leverage the brand value and equity. By analyzing the stock price before and after co-branding announcement events in the U.S., this paper explores whether the introduction of co- branded products could positively impact a firm’s stock value and how different attributes of co-branding structure influence firm stock value. The results suggest that co-branding events indeed lead to significant abnormal returns, and a high (vs low) co- branding integration and a long (vs short) co-branding duration can generate significantly higher abnormal returns. In contrast, previous co-branding experience and co-branding exclusivity do not affect the stock return. The managerial implications are discussed in the concluding section. Keywords: Co-branding, co-branding structure, firm stock value, abnormal return, event study Introduction Brand plays a critical role in building the position of corporations in the international market (Douglas, 2001). The growing competition of the international market makes corporations realize that it is important to cooperate with other brands to form a brand alliance. A brand alliance is defined as combining two or more brands in marketing activities (Rao and Ruekert, 1994; Simonin and Ruth, 1998; Rao et al., 1999). It drives brand partnership development and benefits for the involving partner brands (Besharat & Langan, 2014; Newmeyer et al., 2014). For example, co- branding can enhance existing brand associations and improve brand awareness (Keller, 2008). Furthermore, co- branding is an effective strategy used in the international market. It helps multinational corporations attract consumers’ attention and cut costs when entering new markets (Blackett and Russell, 1999; C. Nguyen et al., 2018; Park et al., 1996). Previous literature demonstrates that a co-branding strategy is valuable in the marketing domain. As a type of brand association, co-branding is positively related to brand value and brand equity (Aaker, 1991; Aaker, 1996). Balachander and Ghose (2003) show that advertising the new combined brand can positively affect family brands and reduce advertising expenditure for both parties. However, existing research has paid limited attention to how the co- branding announcement events impact a firm’s stock value (Cao and Sorescu, 2013; Nguyen et al., 2020). This study aims to address this research gap. Specifically, using the event-study method, we investigated whether co-branding announcement events generate short-term abnormal returns in the U.S. stock market, and how the attributes of the co- branding structure further impact Murong Miao, Department of Marketing, Northern Michigan University, Marquette, MI 49855 Tel.: (757) 451-9069 mmiao@nmu.edu Junzhou Zhang Department of Marketing, Feliciano School of Business, Montclair State University Montclair, NJ, 07043, zhangju@montclair.edu Tianfu Wang*, Department of Marketing, Feliciano School of Business, Montclair State University, Montclair, NJ, 07043, wangt@montclair.edu. the abnormal returns. The results indicate that the introduction of co-branded products indeed generates positive abnormal returns, and high (vs low) co-branding integration and long (vs short) co-branding duration significantly influence abnormal returns. Our findings can provide practical guidance to both marketing researchers and brand managers in their branding related business practice. Literature Review To adapt to the constantly changing market, marketers should adjust the branding strategy to take advantage of opportunities and deal with challenges (Batra et al., 2000; Rowley and Hanna, 2019). Aaker (1991) proposes that companies are increasingly interested in cooperating with other brands to achieve better development because the brand is the most valuable asset of the company (Bengtsson, 2002). The co-branding strategy has been extensively used by marketers for a few decades. For example, Bonne Belle and Dr. Pepper cooperated to make a new flavored lip balm in 1973. Previous marketing scholars labeled co-branding in different ways, such as joint branding (Rao and Reukert, 1994), composite brand extension (Park et al., 1996), brand alliance (Simonin and Ruth, 1998), and co-marketing alliance (Venkatesh et al., 2000). Co-branding is broadly defined as any combined pairs of brands collaborating in marketing activities (Kapferer, 2012), such as promotion, advertising, services, or distribution (Grossman, 1997; Voss and Gammoh, 2004). Because using a co-branding strategy can potentially lead to image transference among corporate brands (Waters, 1997), existing parent brands would benefit from the co-branded products. Specifically, co-branding is viewed as the collective leverage of both primary brand and secondary brand through product or service association (Blackett and Boad, 1999). In a co-branding event, both the primary brand and the secondary brand are combined at the same time to form the new co-branded product (Levin et al., 1996). The constituent brands stay independent not only before but also after producing the co-branded product (Ohlwein and Schiele, 1994). The involved firms should jointly launch a co-