Country Reputation and Corporate Activity

98 Pages Posted: 19 Nov 2018 Last revised: 22 Oct 2019

See all articles by Mehmet Canayaz

Mehmet Canayaz

Pennsylvania State University - Smeal College of Business

Alper Darendeli

Nanyang Technological University

Date Written: October 21, 2019

Abstract

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

Canayaz, Mehmet and Darendeli, Alper, Country Reputation and Corporate Activity (October 21, 2019). Finance Down Under 2019 Building on the Best from the Cellars of Finance. Available at SSRN: https://ssrn.com/abstract=3224538 or http://dx.doi.org/10.2139/ssrn.3224538

Mehmet Canayaz (Contact Author)

Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802
United States

Alper Darendeli

Nanyang Technological University ( email )

Nanyang Business School, S3-B1C-85
Nanyang Ave
Singapore, Singapore 639798
Singapore
+65 67906147 (Phone)

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