The Market Valuation of Firm Reputation
23 Pages Posted: 12 Apr 1999
Date Written: March 1999
We show that the intangible asset, firm reputation, has value-relevance as measured by its ability to explain part of the difference between BV and MV. Firm reputation is measured using the Fortune survey of "America's most admired companies." We allow the Fortune rankings to serve as a proxy for nonfinancial information, such as customer service and intellectual capital. We demonstrate this summary measure of nonfinancial information adds to market value, even after controlling for the financial performance halo effects on the Fortune ratings.
JEL Classification: M41, M44, O33, G12, G14, G29
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