ABSTRACT

With the recent advent of the knowledge and information- based society, a company's intangible assets are becoming more important, and the measurement and valuation of intangible assets have become one of the main themes in accounting theory.

This study measures brand equity, one of the intangible assets using the Simon and Sullivan Model and the Disclosure Number Model and determines the relationship between brand equity and a firm's value.

The Simon and Sullivan Model uses advertising cost, the age of the firm, order of marketentry, and comparing the advertising costs spent by competitors as variables for brand equity. However, this study uses the Brand Power Index of the Korea Management Association as proxy data for the individual brand equity.

Both methods showed positiver esults, but this study expands this further by comparing the advertising costs and the number and amount of advertisement disclosure for a more convincing result. As a result, it was discovered that the number of advert isement dis closure was the best variable to describe brand equity. Therefore, it was concluded that the Simon and Sullivan would be used, but the number of adver-tisement disclosure should be used in place of advertising cost to measure brand equity. As for the number of advertisement disclosure, the number of times a company's brands were mentioned on TV, radio,newspapers and periodicals through its products were used. However, as it was discovered that the dat a samples for advertisement disclosure from 1990 to 1994 are ins ufficient the brand equity measurement conducted before 1994 lacks objectivity.

This paper uses three Regression Models (Yearly Model, Cumula-tive Yearly Model, and Industry Cumulative Yearly Model) to determine the brand equity of the intangible assets, and the following three methods were used to prove the external validity of the brand equity measured.

First, the relationship between brand equity of the Simon and Sullivan Model per share and the number of disclosure per share were examined, assuming that K is the market value per share divided by the book value per share. That is to say, if there is a positiver elationship between the brand equity and K, it means that brand equity represents excess profit. As brand equity is an equal variant in the Spearman'rho only, and positive relationship was found in MethodI, Method II and III in the Number of Disclosure Model.

Second, market value per share was used as a dependent variable, while book value per share, ordinary income per share, and Simon and Sullivan's brand equity per share were used as independent variables . Therefore, if the brand equit y per share is a positive coeffi-cient for the marketvalue, it can be said that brand equity is an important asset on the balance sheet.

In the Simon and Sullivan Model, all of the yearly data for Method I were positive except for 1990; all of the cumulative year data for Method II were positive except for 1990 and 1991; and 11 of the 15 industries data in Method III were positive except for chemicals , IT, automobile, and transportation.

With regards to Disclosure Number Model, all data were positive in Method I except for 1993, 1995, and 1998; all data were positive for Method II except for ' 91-' 93, '91- '94 and '91- '95; while the industr(chemicals, IT, and transport ation) not found meaningful in the Simon and Sullivan Model were found positive for Method III. In conclusion, it was found that brand equity is an important asset in determining the market value.

Third, Samsung Electronics and LG Electr onics were analyzed using Method III of the Simon and Sullivan Model. It was discovered that brand equity, brand equity per share, and price per share were almost the same for the two companies before 1993, but with the successful developments of the 64M DRAM in 1993 and the 256M DRAM in 1994 by Samsung, there resulted a big gap in brand equity between the two brands on various indices.

Through this event study, it was evident that Samsung Electronic was able to increase their market share and increase sales to result in excess profit for the company, and thus also increase their br and equity, an intangible ass et. Therefore, it can be said that important events such as technology developments of a company affect their br and equity.

In conclusion, it is clear that brand equity is closely related with a companys market value, and if brand equity can be s eparated from the intangible assets and calculated objectively, it should be accepted as one of the main indicators on the balance sheet.

Key Words:
brand equity, market value, event study, number of dis closure

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