Country Reputation and Corporate Activity
98 Pages Posted: 19 Nov 2018 Last revised: 22 Oct 2019
Date Written: October 21, 2019
We study the link between a previously neglected form of intangible asset—country reputation—and corporate sales. By exploiting variation in nationalities of foreign victims in local terror attacks, we detect unanticipated distortions in reputations of local countries in foreign countries and we pin down reductions in sales of local country firms in foreign markets. The reductions in sales are economically and statistically significant, persistent, and more pronounced after attacks with casualties and high levels of foreign media coverage. Local country firms, whose names resemble names from their countries of origin, experience greater deteriorations in their sales. The distortions in country reputations are associated with depreciations in overall firm value, asset growth, and profitability.
Keywords: country reputation, intangible assets, firm sales, reputational risk
JEL Classification: G32, G40, G41
Suggested Citation: Suggested Citation