Wedded Bliss or Tainted Love? Stock Market Reactions to the Introduction of Cobranded Products

Abstract

We examine whether cobranding—the practice of using two established brand names on the same product—increases the market value of parent firms. Using data from the consumer packaged goods industry, we document that the average stock market reaction to the announcement of cobranded new products is approximately +1.0%. We hypothesize that this reaction is significantly higher than it would have been if these same products were single branded, and we find evidence consistent with this hypothesis. We also examine the determinants of this stock market reaction. We find that the consistency between the two brand images, the innovativeness of the product, and the exclusivity of the cobranding relationship significantly increase the market reaction to cobranding announcements. Our findings provide important managerial guidelines for enhancing firm value through cobranding partnerships.

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