Two Worlds Colliding: Understanding the Effects of Reputational Domain Overlap

Abstract

Despite the extensive research into the effects of reputation, virtually all of this research has examined the effect of one type of reputation on one or more specific outcomes. In this study we ask the question: How do the reputations of star analysts and star CEOs individually and jointly affect firm outcomes? To answer this question we focus on a context where reputations are particularly relevant – changes in analyst recommendations and the effect of those changes on stock market reactions. Our study makes a contributions to the growing reputation literature by being one of the first studies to recognize and measure how the market accounts for multiple reputations within a given context. Furthermore, we argue and find that the reputations of different actors interact with each other when determining particular firm outcomes. We find that different reputational domains influence both the actions of actors as well as the reactions of observers. Finally, we demonstrate that prior reputational research may have misstated the effects of reputation (either positively or negatively) by failing to consider how other forms of related reputation may jointly affect outcomes.