Brand licensing is becoming increasingly pervasive, with the top 150 global licensors generating licensed merchandise sales of over $250 billion at the retail level in 2013. Brand licensing involves a brand owner (the licensor) giving another firm (the licensee) the right to manufacture/market its products under the brand name. On the one hand, brand licensing can enhance a licensor’s shareholder value by generating additional cash flows from royalties on licensee product sales. On the other hand, brand licensing entails the licensor ceding control over the manufacturing/marketing of a product with its brand name to a licensee; opportunistic behavior by a licensee can lead to brand dilution and thus hurt the licensor’s shareholder value. We argue that investors react more favorably to a brand licensing announcement when they believe (i) the brand has greater ability to stimulate licensee product sales, and thus generate higher royalties for the licensor, and (ii) the licensor firm has greater ability to limit licensee opportunism. We examine 171 brand licensing announcements and subsequent changes in the licensor firms’ shareholder values using the event study method. We find that while brand licensing announcements lead to positive abnormal returns on average, a large number of announcements in our sample are followed by negative abnormal returns. Furthermore, we find that investor reactions to licensing announcements are related to characteristics of brands licensed, and characteristics of licensors in a manner that is largely (but not entirely) consistent with our a priori hypotheses.