Abstract
This paper empirically examines the impact of online reputation on investment in hotel industry. Recent theory suggests that reputation could have ambiguous effects on investments. Using detailed firm-level data on investment expenditures, and online consumer ratings from Taiwanese hotels, I adopt a regression discontinuity design based on TripAdvisor's rating display system and identify treatment effects. The regression discontinuity estimates show that that higher ratings negatively impact investment expenditures while lower ratings tend to encourage investment. The findings are consistent with Board and Meyer-ter-Vehn (2013), in which their good news model predicts that firms shirk when they have good reputation.
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