Market Valuation of Corporate Reputation

Posted: 13 Jul 2010

Date Written: February 13, 2010

Abstract

Brand associations affect image and one source of brand association is a company’s reputation. While the relationship between a positive corporate reputation and operational performance is intuitively appealing, there has been relatively little empirical research. This study, using a summary measure from the Fortune survey of America’s most admired companies’, seeks to empirically test the relationship and thereby determine whether firms with a positive brand image, that is those with a positive reputation, experience an economic benefit. Fortune’s summary measure is used as a proxy for intangible assets, such as internally generated goodwill, customer service and intellectual capital. Findings focus around the addition of this summary value to market value in terms of a significant market value premium, superior financial performance, and lower cost of capital. Given these findings, marketing managers would do well to strive to build and maintain a positive reputation.

Suggested Citation

Arayssi, Mahmoud, Market Valuation of Corporate Reputation (February 13, 2010). Available at SSRN: https://ssrn.com/abstract=1639555

Mahmoud Arayssi (Contact Author)

Lebanese American University

P.O.Box 36
Chouran-Beirut 1102 2801
Byblos
Lebanon

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