Brand Capital and Corporate Investment Efficiency

We examine the impact of brand capital on corporate investment efficiency. We argue that brand capital can improve investment efficiency by not bypassing positive NPV projects, making the projects with higher probability to have positive NPV, and restraining managers’ opportunities to undertake negative NPV projects. We empirically show that brand capital improves investment efficiency, and the positive effect of brand capital on investment efficiency is more pronounced for the firms higher financial constraints, higher information asymmetry, or stronger governance. Additional analysis suggests that brand capital strengthens the positive relationship between investment efficiency and future firm profitability