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American Journal of  Environmental
Economics (AJEE) 

The Impact of  Brand Capital on the Stock Price Crash Risk, an Empirical Study
Mustafa M. Alsomaidaee1*, Ahmed A. Mahmood Al Janabi2, Rusul Salman Neamah2

Volume 2 Issue 1, Year 2023
ISSN: 2833-7905 (Online)

DOI: https://doi.org/10.54536/ajee.v2i1.1808
https://journals.e-palli.com/home/index.php/ajee

Article Information ABSTRACT

Received: June 29, 2023

Accepted: July 23, 2023

Published: July 30, 2023

The factors influencing the financial market are rapidly becoming more complex. The 
impact of  non-financial factors on the performance of  a company’s common stock can 
increase in ways that were not previously expected. This study investigated how brand capital 
affects the risk of  stock prices in Iraqi private banks listed on the Iraq Stock Exchange failing 
by identifying the likelihood of  a crash caused by a negative deviation in the distribution of  
returns on ordinary shares. As a result, the current study’s concept is to review an analytical 
knowledge framework of  the nature of  that relationship, its changes, and its impact on 
the pricing of  ordinary shares of  the banks of  the researched sector for the years 2009 to 
2017, as well as by the 21 banks listed during that time and by the 588 observations using 
the expanded market model to determine quarterly changes in stock prices. In addition to 
testing the negative coefficient of  skewness and the down-to-up volatility models to test the 
contribution of  brand capital in reducing the risk of  stock collapse, The test results showed 
that brand capital is closely related to the significant and adverse risks of  a stock crash. 
Additionally, the first’s impact is inverse, as its content highlights the role that the research 
sample banks’ brand capital played in lowering the dangers of  stock price crashes.

Keywords

Brand, Brand Capital, Common 
Stock, Iraq, Stock Crash Risk

1 Imamaladham University College, Iraq
2 Ministry of  Higher Education and Scientific Research, Iraq
* Corresponding author’s e-mail: mustafa.alsomaidaee@gmail.com

INTRODUCTION 
Marketing, beyond tangible elements and brand capital, 
has not received sufficient attention from modern 
economic literature, particularly in the Arabic context. 
Moreover, its partial and overall effects on industry 
structure, productivity, and overall outputs have been 
poorly identified in studies. For the most part, due to 
technical reasons, the most surprising aspect was the 
explicit neglect of  the brand. Previously, the concept 
of  brand capital was limited to the responsibilities of  
marketing executives only. However, this concept has 
evolved to include the added value it brings beyond the 
physical value of  a product that can be observed or felt 
by two parties: the first being the customer through their 
behavior and culture towards a particular brand, and 
the second being the company considering its brand 
as a financial existence and a capital value in addition 
to its visible profits as one of  the important intangible 
assets of  the company. It must be emphasized here that 
brand capital plays a vital role in unleashing the business 
potentials of  the company through expanding its market 
share, fostering customer loyalty, increasing stakeholder 
engagement, retaining talented employees, attracting 
investments, and differentiating the company and its 
products in the market. Brand capital is one of  the essential 
elements for the success of  any company or product in 
the marketplace. It represents the economic and social 
value of  the brand and the competitive advantages it 
provides. This kind of  capital represents the economic 
and commercial value of  a brand in a competitive market. 
Brand capital is composed of  various factors such as the 
brand itself, intellectual property, customer relationships, 
reputation, and financial and human resources. Brand 

capital is measured based on the strength of  the brand 
and its ability to attract and retain customers. Previous 
studies, including the study by (Hasan et al., 2022; Hussain 
et al., 2020; Mousa et al., 2021; K. Wang & Jiang, 2019) 
indicate that brand capital has a significant impact on 
the competitiveness and sustainability of  companies, 
with benefits flowing into growth, profitability, and 
market value. The study by (Qashi & Sufyan, 2015) 
strategically presented brand capital as a crucial element 
when entering markets, especially international markets. 
Additionally, (Ariff  et al., 2016; Hall, 2001; Setiadharma & 
Machali, 2017) suggests that the value of  any company is 
reflected in the value of  its tangible capital stock, such as 
machinery, facilities, and internal and external branches, 
as well as the value of  the intangible capital stock, such as 
employee skills, brand name, and customer base.
It is worth mentioning that intangible capital can be 
described as an important component of  a company’s 
overall value in the stock market, and its significance 
has greatly increased in recent decades. Therefore, 
understanding the impact of  intangible capital on 
company performance is an important question that can 
help us understand the economic determinants of  stock 
values in that market (Gamayuni, 2015). The previous 
author mentioned indicates that financial markets take 
into account the brand equity of  all companies in their 
regular stock valuations. Similarly, (Gourio & Rudanko, 
2014) showed that companies with a higher concentration 
of  brand capital in the minds of  consumers and clients 
have a higher average stock return than companies with 
a lower density of  brand capital. (Cui et al., 2018; Hsu 
et al., 2013) found that brand reputation has a positive 
impact on stock returns and trading volume. Consistent 



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with what has been mentioned, investor sentiment has a 
positive effect on stock returns while having a negative 
impact on the trading volume of  those stocks, leading 
to their collapse compared to their counterparts from 
other companies. The negative investor sentiment 
decreases positively in response to the impact of  brand 
reputation on stock returns, but it increases negatively 
due to the influence of  brand reputation on low trading 
volume stocks, which may exacerbate the pace of  this 
decline towards collapse. This may be attributed to the 
effect of  brand reputation and investor emotions on the 
performance of  stocks across companies with different 
brand values. This phenomenon is more pronounced 
in companies with high brand values compared to 
companies with relatively low brand values. Meanwhile, 
the same study confirms that the negative impact of  
investor sentiment on stock trading volume is lower 
in companies with high brand value, highlighting the 
importance of  building brand reputation to improve 
stock performance and avoid future collapses. In the 
current paper, we examine the impact of  brand capital 
on the stock price crash risk in the Iraqi Stock Exchange 
for the period from 2009 to 2017 on a quarterly basis. A 
sample of  banks listed on the Iraqi Stock Exchange was 
selected to represent the research sample.

LITERATURE REVIEW
When there is an agreement between the brand’s 
perceived position and the customers’ purchase objectives 
for consumers (i.e., between what the company’s brand 
represents and what customers and consumers are 
looking for), the relationship between a brand’s perceived 
capital and the purchase of  its products by customers and 
consumers emerges (O’Rourke et al., 2022). Consumers 
are more likely to pay more for a brand’s distinctive name 
than for products with a similar name (Keller et al., 2011). 
As a result, brand capital is a useful input since it aids in 
growing consumer loyalty, enticing people to buy more, 
and other methods of  raising sales for companies. As a 
result, brand capital may be described as an intangible 
asset that captures how knowledgeable consumers 
are about the products and services that are offered 
(Arkolakis, 2010). According to (Vitorino, 2014), brand 
capital can be defined as one of  the company’s intangible 
and important assets, which summarizes the perception 
of  customers and consumers of  the company’s products 
and services and their insistence on acquiring them in the 
long term. Because it increases consumer loyalty or first 
impressions, brand capital is a production component in 
the operating profit function of  a company (Foroudi et 
al., 2018). This helps companies grow sales. Additionally, 
brand capital enables companies to set their products 
and services apart from those of  rivals and is thus 
potentially advantageous. Thus, it is a potential source of  
competitive advantage through its impact on cash flows 
(Belo et al., 2014). Brand capital is likely to have an impact 
on a company’s risk profile, which in turn affects its 
cost of  capital and market capitalization (Vomberg et al., 

2015). As an intangible asset, the company’s brand capital 
is challenging to quantify. As a result, the value of  the 
company’s shares as a result of  its brand capital affects the 
company’s entire market value. Additionally, brand capital 
influences the company’s overall risk and, consequently, 
the cost of  capital through its effect on cash flows. Brand 
capital is a significant production component since it 
boosts consumer loyalty, clarity, trustworthiness, quality, 
and mutual pleasure between the two parties, all of  which 
help to increase sales (Pillai, 2012) . Therefore, through 
its effect on cash flows, brand capital is expected to affect 
companies’ default risk and their market prices (Fischer 
& Himme, 2017).
The financial crisis that happened worldwide in the last 
decade of  the twenty-first century had its roots in the 
financial liberalization policies that many large economies, 
like the United States of  America, for example, had 
adopted. Some of  these policies’ outcomes included high 
capital flows across national borders, which exposed the 
economies of  some nations to weaknesses that led to the 
occurrence of  negative pressure on the capital markets 
(Al-Nuaimi, 2021). Numerous studies, such as (Kabir, 
2023; Moritz et al., 2015; Sivaramakrishnan et al., 2017), 
show that customer interactions in the product market 
have an impact on investment choices made in financial 
markets, which has an impact on stock prices in those 
markets as a result. Companies that invest in brand capital 
typically have unusual earnings and better profitability 
over the long term than their peers operating in the same 
sector due to the distinctive nature of  some brands (Lou, 
2014). It was later found that companies that go public 
with high levels of  publicity prior to their initial public 
offerings (IPOs) are highly valued, both in initial public 
offerings and after direct sales (Chemmanur & Yan, 
2017). In order to launch the company’s products and 
increase its market share, the brand’s capital is essential. 
This initial success has a big impact on the company’s 
competitiveness and long-term viability, which in turn 
affect the value of  its shares on the financial market. 
Over the past decade, evidence in the media has shown 
the importance of  brand capital to companies’ financial 
performance and credibility and has indicated how the 
release of  negative information about brands can affect 
share prices. For instance, Facebook’s market value 
decreased by more than 100 billion dollars within days 
of  the discovery that data analytics company Cambridge 
Analytica had secretly created social profiles of  US 
residents using Facebook data (Tuttle, 2018).
In the period from 2016 to 2018, those interested in many 
countries began to investigate the data of  Volkswagen, 
which proved the existence of  tampering with diesel 
emissions devices in its manufactured vehicles, and as 
a result of  this event, the company’s share price fell by 
about 33% of  the real value of  the share in the days 
that followed the issuance of  this news. Notably, there 
are additional elements that cannot be disregarded that 
both directly and indirectly influence stock values, such 
as (economic, political, etc. As a result, investors shift 



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their funds and investments to other, more stable nations 
(Tharshiga, 2013; Utonga & Ndoweka, 2023). According 
to the aforementioned, the risk of  stock collapse is the 
ongoing occurrence of  excessively negative returns on the 
stock’s value. The collapse of  stock prices is a risk of  the 
utmost importance for any investor and for any company 
due to its impact on the company’s decision-making and 
risk management, according to (Dang et al., 2018). In 
the same vein, (J. Kim & Zhang, 2016) found that some 
businesses implemented a tax avoidance approach and 
hid unfavorable financial facts, which increased the risk 
to their stock prices. The theory of  Bad News Hoarding 
(Jin & Myers, 2006), which is based on keeping negative 
news hidden from investors and other interested parties 
for as long as possible, up to the tipping point, should be 
included as one of  the hypotheses relating to the dangers 
of  a stock crash. Due to the great value of  the bad news 
relative to the gain received, the company is currently 
unable to conceal it. The company uses this approach 
to accomplish certain financial and strategic objectives 
(Habib et al., 2018).
We should address other explanations for the risks of  
the crash of  stock prices, including the most important 
of  which is the reaction of  investors towards the 
fluctuations in stock prices and the risk of  their crash 
in the financial market as a result of  achieving negative 
distortions. In this context, it can be said that some 
factors affect the likelihood that stock prices will fall, 
including factors relating to the financial markets, factors 
affecting stock market competition, factors affecting the 
volume of  trading, and factors that are closely related 
to the aforementioned “Bad News Hoarding Theory”.  
Withholding bad news increases the risk of  a collapse in 
the share price of  the company, which reduces the value of  
its brand (Arianwuri et al., 2017; F. Jiang et al., 2020). This 
is because it causes an increase in information asymmetry, 
which leads to an increase in short selling. In addition, the 
greater the negative skewness of  the share’s return, the 
greater the risk of  a collapse in the share price, which is 
reflected in the value of  the company’s brand (de Oliveira 
Ribeiro, 2017). (Qamouza, 2021) found determinants 
related to the company itself, including (audit quality, 
profit determination, financial analyst expectations, and 
the ambiguity of  financial reports). The aforementioned 
leads us to the conclusion that the collapse of  the stock 
price, which is defined as a rapid and drastic decrease 
in its prices, is an important subject in financial studies 
due to its influence on investment choices. As a result, 
there is an increasing number of  specialized literatures 
in financial management that examines the causes and 
effects of  the risk of  stock price crash from many aspects. 
Numerous studies have examined the correlation between 
administrative incentives, both moral and financial, to 
hide some bad news, tax evasion, a lack of  financial 
transparency, and some characteristics given to the CEO 
(Bayar et al., 2018; Kim et al., 2011; Wang, 2010). This 
includes excessive confidence, which creates significant 
risks that result in a crash in stock prices. Based on the 

previous discussions and relying on (Christodoulides et 
al., 2007) ideas in measuring brand capital, we propose 
the following hypotheses and sub-hypotheses:

H01: Brand capital has a negative effect on reducing 
the risk of  crash stock prices in Iraqi private banks.

H01a: Emotional connection has a negative effect on 
reducing the risk of  crash stock prices in Iraqi private 
banks.

H01b: Service response nature has a negative effect on 
reducing the risk of  crash stock prices in Iraqi private 
banks.

H01c: Trust has a negative effect on reducing the risk 
of  crash stock prices in Iraqi private banks.

H01d: Customer satisfaction has a negative effect on 
reducing the risk of  crash stock prices in Iraqi private 
banks.

MATERIALS AND METHODS
Capital markets in general suffer from continual dynamic 
changes and fluctuations for a variety of  complicated 
causes, necessitating the need to understand the sources 
of  these changes and strive to enhance the right reaction 
to them. And in the case where there are many causes of  
stock price changes and their potential effects, which may 
extend not only to the capital of  the individual institution, 
but to the entire sector, the importance of  researching 
arises from monitoring these changes and limiting them 
whenever possible.

Instrument
We relied on multiple sources to gather the data. Primarily, 
we relied on the annual reports and financial data issued 
by the Iraqi Securities Commission (ISC) as well as the 
Iraq Stock Exchange (ISE). On several occasions, we also 
reviewed the financial statements of  the selected banks 
in the current study. Unfortunately, we were unable to 
obtain the weekly closing prices of  the stocks. Therefore, 
we have opted for quarterly stock prices throughout 
the year. We relied on previous theories and measures 
to measure brand capital through a Likert scale of  five 
points (5 = fully agree, 0= fully disagree). All results of  
the stability, reliability, and internal consistency tests were 
acceptable and supportive.

Sampling and Data Collection
The research population represents the listed companies 
in the Iraq Stock Exchange for the period between 2009 
and 2017, totalling 105 companies distributed across 
9 diverse sectors. The banking sector was chosen as a 
purposive sample for the research, consisting of  21 banks 
out of  a total of  46 banks within the overall sector. This 
decision was made due to various reasons, including the 
fact that some banks were listed in the market during the 
specified time period. Additionally, there were difficulties 
in accessing monthly data for some other banks due to 
various reasons, such as undisclosed financial reports and 
suspension of  trading for different periods. Thus, the 
sample represented (45.6%) of  the total banking sector, 



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(20%) of  the total companies listed in the market, and 
the total number of  views was (588) views on a quarterly 
basis per year. A variety of  sources were relied upon to 
obtain the data, the most important of  which were the 
Iraqi Securities Commission, the Iraq Stock Exchange, 
and the financial reports published on the websites of  
some banks included in the study sample. The private 
Iraqi banking sector was chosen as the field of  study based 
on the following justifications: (1) The banking sector is 
considered a vital component in the development and 
revival of  the Iraqi economy. (2) Investing in the banking 
sector is highly risky and subject to future uncertainties. 
(3) Providing detailed financial data about it enriches the 
analytical research aspect.

Variables and Measures
The role of  brand capital in lowering the risk of  a stock 
crash is examined using the extended market model 
for regression analysis in order to test and analyze the 
main research hypothesis, and the two models; negative 
coefficient of  skewness and down-to-up volatility 
(NCSKEW and DUVOL) are used to measure the stock 
price crash risk within the environment of  the studied 
sector. Share price movements were calculated on a 
quarterly basis for each company based on the research 
period from 2009 to 2017. According to (Callen & Fang, 
2015; Hutton et al., 2009; Jiang et al., 2022; Wang & Jiang, 
2019), and, the extended market model was used for 
regression analysis:
r𝑗,𝜏 = α  + β1 rMKT,𝜏 −2 + β2 rMKT,𝜏 −1 + β3 rMKT,𝜏 + 
β4 rMKT,𝜏 +1 + β5 rMKT,𝜏 +2 + ε𝑗,𝜏                  (1)
Where r_(i,𝜏) represents the quarterly returns per share 
according to the value of  growth in the market, while r_
MKT represents the return of  the Iraq Stock Exchange 
index according to the search time period, while ε𝑗,𝜏 
represents the remainder (error coefficient) of  the 
equation, which is expected to be highly skewed, which 
necessitates convert it to an approximately symmetric 
form by adding the natural logarithm of  1 to it:
Dj=LN(1+ϵj,t)                        (2)
The negative coefficient of  skewness method, also 
known as NCSKEW, and the down-to-up volatility 

approach, also known as DUVOL, were used to calculate 
the risk of  stock crash. With regard to the first approach 
(NCSKEW), it bases its analysis on comparing returns 
with negative values to those with positive ones. As 
a result, the skewness is transformed into a symmetric 
distribution by raising its standard deviation values to the 
third power (3) and as in the formula below ( Kim et al., 
2016; Zhang, 2010):
NSKEW𝑗,= − n (n − 1)3/2∑W3

𝑗, 𝜏 / (n − 1) (n − 2) (∑W2
𝑗,𝜏 )

3/2    (3)
Where W (j,t) denotes the quarterly stock returns of  the 
company for the given time period (n). With regard to 
the second method (DUVOL), the stock returns are split 
into two groups: the group that includes returns with 
values that are less than the average returns for the period 
(nu), and the group that includes returns with values that 
are higher than the average (nd), after which the value 
of  volatility is calculated. Using the natural logarithm of  
the deviation between the lower and higher sections as 
determined by the following equation:
DUVOLi,k= Log { (nu−1)∑downW2

i,s /  (nd−1)∑upW2
i,s}     (4)

Brand capital measurements ranged from those 
that concentrated on financial data (advertising and 
promotional expenditure items), as in (Hasan et al. 2022: 
7233), to those that concentrated on the exteriors of  
the establishments, particularly those that gave a greater 
perception of  the brand awareness or association with 
it by outsiders. A series of  sub-dimensions, including 
emotional connection  (EC), service response nature 
(SRN), trust (TR), and customer satisfaction (CS), 
were used to measure brand capital according to 
(Christodoulides et al., 2007).

Descriptive Statistics
The descriptive statistics data for the search variables 
are shown in Table (1). It is evident from this data that 
the research sample companies’ average share price was 
(1.04) dinars, while the highest share price for the same 
period was (6.1) dinars, which was the share price of  Dar 
Al Salam Bank for the year 2010. The chart also displays 
the brand capital variable’s high arithmetic averages fell 
between (4,412 and 4,550), with the variable’s overall 
average coming in at (4,470).

Table 1: Descriptive Statistics
No. Variable Sample Mean SD Skewness lower values Higher values
1 NSKEW 588 -0.001 0.020 0.189 -0.04 0.09
2 DUVOL 588 -0.403 3.918 -2.112 -0.89 0.67
3 EC 40 4.460 0.805 2.952 1 5
4 SRN 40 4.412 0.758 2.818 1 5
5 TR 40 4.550 0.751 3.195 1 5
6 CS 40 4.450 0.881 2.841 1 5

Correlation Analysis
According to Table (2), which displays the Pearson 
method’s correlation between the search variables, the 
majority of  the correlations between the stock price 
crash risk according to the two methods (NCSKEW) and 

(DUVOL) and the brand capital were inverse, meaning 
that brand promotion, the strength of  its spread, and 
the depth of  customer awareness of  the brand lower the 
risk of  crashing share prices of  study sample companies.  
Greater customer happiness with banks in general lowers 



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the probability of  a decrease in their common stock values, 
according to the (NCSKEW) method’s strongest negative 
correlation between customer satisfaction (CS) and the 
likelihood of  a crash in stock prices. The emotional 
connection (EC) and the danger of  stock price crashes 
for the research sample banks had the strongest negative 

association, as measured by the (DUVOL) technique. Last 
but not least, the correlation between the two approaches 
to estimating the probability of  a stock crash was found 
to be positive and substantial, highlighting the similarities 
between the approaches.

Table 2: Correlation analysis
Variable NCSKEW DUVOL EC SRN TR CS
NCSKEW r Pearson 1

sig --
DUVOL r Pearson 0.300** 1

sig 0.000 --
EC r Pearson -0.233 -0.0168 1

sig 0.148 0.199 --
SRN r Pearson -0.219 -0.155 0.927** 1

sig 0.174 0.339 0.000 --
TR r Pearson -0.235 -0.125 0.917** 0.941** 1

sig 0.144 0.442 0.000 0.000 --
CS r Pearson -0.318 -0.159 0.926** 0.940** 0.924** 1

sig 0.051 0.328 0.000 0.000 0.000 --

Hypothesis Testing
Tables (3) and (4) summarize the results of  analyzing the 
main research hypothesis as well as the sub-hypotheses 
according to the two methods (negative torsion 
coefficient - NCSKEW) and (volatility from bottom to 
top - DUVOL).
The strength of  the regression model is demonstrated 
by the fact that the determination coefficient (R2) value 
was high in both situations (NCSKEW: R2=0.586) and 

(DUVOL: R2 = 0.805). According to the (NCSKEW) and 
(DUVOL) methods, the stock price crash risk explains a 
total of  (59%) and (81%) of  the changes in brand capital, 
respectively. The remaining explanatory factors are left 
to variables and factors that were not examined in the 
current study.
According to the (DUVOL) method, the relationship 
between confidence and the stock price crash risk had the 
highest negative regression coefficient value of  (-0.761), 

Table 3: Regression Model Analysis (NCSKEW)

NCSKEW

Dimensions β Std. Error t Sig.
Emotional connection -0.142 0.477 -1.982 0.040
Service response -0.182 0.562 -2.462 0.032
Trust -0.200 0.436 -4.480 0.000
Customer satisfaction -0.214 0.666 -2.500 0.002
R 0.765
R2 0.586
F 13.075
Sig. 0.000

Table 4: Regression Model Analysis (DUVOL)

DUVOL

Dimensions β Std. Error t Sig.
Emotional connection -0.484 0.207 -2.335 0.025
Service response -0.632 0.221 -2.885 0.007
Trust -0.761 0.139 -5.459 0.000
Customer satisfaction -0.643 0.220 -2.890 0.006
R 0.897
R2 0.805
F 38.080
Sig. 0.000



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whereas the highest negative value in the (NCSKEW) 
method was for the slope Customer satisfaction, which 
had a negative value of  (-0.214). Since more negative 
values contributed to the regression model, it is evident 
that the results of  the (DUVOL) approach appear to be 
more significant.

RESULTS AND DISCUSSION
These results indicate, in their content, the rationality of  
the scientific proposal on which the research was based, 
which was based on the fact that the relationship between 
the capital of  the brand and the share prices of  the banks 
in the research sample depends on what the company 
offers to its customers and society mostly through the 
volume of  emotional connection, response to services, 
trust, customer satisfaction, and the extent of  reflection 
of  this on their shares and vice versa. Thus, the strength 
of  the relationship between the two variables increases 
to greater extents when the brand value of  the research 
sample companies increases, which is accompanied by 
an increase in the value of  the share to greater limits, 
in exchange for a greater decrease in the risk of  their 
prices crashing.
Descriptive statistics show sharp changes in the stock 
prices of  the banks in the research sample, implying that 
they face the stock price crash risk in various quantities. It 
is also clear from the descriptive statistics that the shares 
of  the banks in the research sample fell significantly 
between 2014 and 2017, a period marked by security 
failures that had a significant impact on the movement of  
the commercial and financial markets alike. The research 
data revealed a considerable delay in responding to the 
research sample banks’ periodic financial disclosure 
obligations, which resulted in repeated practices of  
suspending and restarting trade. In contrast to the smaller 
group of  banks in the research sample, the majority of  the 
banks surveyed are still experiencing a decline in the value 
of  their market shares for a variety of  reasons, including 
those mentioned above, as well as instructions from 
the Iraqi Central Bank requiring banks to increase their 
capital to much higher levels than are currently in place. 
The variables (emotional connection and trust) displayed 
a larger inverse correlation with the risk of  the stock 
price collapse, implying that strengthening and caring 
for them reduces the chance of  stock price collapse. The 
brand’s capital has reduced the risk of  the collapse of  
stock prices for the time period specified in the research, 
according to the negative skewness method of  returns. 
This favorable result is attributed to the beneficiaries’ 
level of  satisfaction with the aforementioned banks to 
the greatest degree, followed by their confidence in the 
brand. In accordance with the volatility method of  low 
to high, brand capital has also decreased the stock price 
crash risk for the time period specified in the research, 
which is also attributed to the beneficiaries’ trust in the 
banks’ brands in the research sample to a higher degree 
than their satisfaction with it. According to the findings, 
the levels of  customer satisfaction with the services 

offered by the research sample banks, along with higher 
levels of  confidence in them, contributed the most to 
lowering the risks of  the collapse of  stock values. Due 
to the additional defenses, it helped to provide against 
the dangers of  stock price fluctuations and the potential 
for their collapse, as well as the failure of  the bank as a 
whole in the end, this strengthened the brand capital of  
such banks.
In the Iraqi business environment, marketing efforts and 
campaigns are crucial issues. The private banking sector 
in Iraq is still in its early stages and has faced numerous 
failures. This necessitates further marketing initiatives 
aimed at enhancing trust in banks and establishing their 
brand in the minds of  customers. It is expected that 
customers’ interests will eventually shift from ordinary 
depositors to shareholders in private Iraqi banks, 
especially with the accelerated development of  the stock 
market. Until then, which may be very soon, customers 
will look forward to gaining a deeper understanding of  
private bank activities, reviewing financial statements, 
and consequently making investment decisions. Leading 
branded banks will attract the interest of  new investors. 
New shareholders will also be reassured by the ability 
to handle risks, including the risk of  stock price crash, 
based on the strength of  the brand and customer trust. 
We focus on the importance of  enhancing relationships 
with current and potential customers based on current 
research findings that have shown that customer trust 
and emotional connection to the brand are key factors in 
mitigating stock price risks. Even in cases where customers 
will not turn into shareholders, their opinion about banks 
will be of  great importance to potential investors. Some 
newly established banks have managed to strengthen 
their brand through smart and effective advertising 
and promotion campaigns, along with their unique 
and distinctive services. So far, it continues to achieve 
outstanding performance and unique growth levels. We 
conclude here that the Iraqi business environment is 
uniquely attractive. It is certain that outstanding players 
will get a larger share of  opportunities. However, 
this would not be sufficient unless it is linked to the 
sustainability of  the brand strength.

CONCLUSION
In this study, we discussed the impact of  brand capital on 
reducing the risks of  stock price crashes in Iraqi banks. 
We relied on a range of  theories and previous discussions 
on measuring brand capital as well as the risks of  stock 
price crashes. According to the study data, there are 
significant problems with the performance of  Iraqi banks. 
We attribute the causes of  these problems to security 
issues and government measures aimed at reducing 
money laundering activities. It was not possible to select 
all private banks, for several reasons, including the fact 
that some of  those banks were recently established and 
listed in the stock market during the timeframe chosen 
for testing in the current study. Despite the exclusion 
of  control variables due to a lack of  financial data, it 



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is evident that the brand capital of  the Iraqi banks is 
a significant contributor to reducing the risks of  stock 
prices crashing.  Emotional connection and customer 
trust were the most important factors that enhanced 
the power of  the brand’s capital. There is a greater 
importance for sustaining and continuously strengthening 
that relationship. We emphasize the need to enhance 
customer relationship management activities because 
the Iraqi business environment is volatile and subject to 
constant drastic changes, which requires extra efforts to 
maintain good customer relationships.  The study stresses 
the value of  releasing financial reports and statements on 
banks’ and listed companies’ websites in general, given 
their significance to both investors and researchers. 
Despite the fact that the security failures between 2014 
and 2017 were unexpected and had a significant impact, 
the inability of  some banks to resume their operations 
has been attributed to poor risk management practices, 
including forecasting and how to deal with them. The 
unique services provided by banks lead to higher levels of  
satisfaction among the beneficiaries, thus enhancing the 
brand’s capital, increasing its reputation and perception, 
and improving its overall intangible assets. As a result, 
it ultimately increases their ability to withstand the risks 
of  market fluctuations or the crash of  common stock 
prices. Naturally, the current study was not without 
limitations. One of  the most significant limitations we 
encountered was the difficulty of  finding up-to-date 
and consistent data in one place. One of  the difficulties 
we also faced is the lack of  customer-related data, 
such as customer volume, the most requested types of  
services, promotional offers, and much more. This may 
represent constraints on realistically identifying customer 
satisfaction levels. Finally, the current study contributes 
to enhancing the awareness of  executive managers in 
private Iraqi banks regarding the importance of  brand 
and continuous efforts to strengthen it.

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