Corporate Reputation and Stock Returns: Are Good Firms Good for Investors?

Abstract

This paper employs a unique dataset from the UK based on ten years of surveys of company directors and analysts conducted for Management Today to examine the relationship between a firm’s reputation and the returns on its shares. We find that investors who purchase stocks with reputation scores that have risen significantly can make abnormal returns. Also, firms whose scores have fallen substantially still exhibit positive abnormal returns in both the short and long run when the market index is employed as a benchmark. However, when a more appropriate comparator is used, evidence of out-performance entirely disappears. Keywords: Corporate reputation, Management Today Most Admired Firms, stock returns. JEL Classifications: G10, G14, M14, M20 Communicating Author: Professor Chris Brooks ICMA Centre, University of Reading, Reading, RG6 6BA, UK. Email: c.brooks@icmacentre.rdg.ac.uk The authors would like to thank Anca Dimitriu of Goldman Sachs, London and Joelle Miffre of Cass Business School, London for their help. The usual disclaimer applies.