Does Noblesse Oblige? The Effects of Firm Reputation and Celebrity on Earnings Surprises and Investor Reactions

Abstract

We examine the effects of firm reputation and celebrity on 1) the likelihood that a firm generates a positive or negative earnings surprise and 2) how investors react to positive and negative surprises when they occur. We find that firms endowed with high reputation and celebrity status receive greater market rewards for positive surprises and fewer market penalties for negative surprises relative to firms that do not possess these intangible assets. In addition, the market reacts more positively to positive surprises by celebrity firms than to positive surprises by high reputation firms. We contribute to organizational research and management practice by highlighting how a firm's specific endowment of intangible assets can lead to the possibility of non-conforming behavior and generate asymmetric evaluations of this behavior in the marketplace.