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Corporate Reputation and Stock Returns: Are Good Firms Good for Investors?

22 Pages Posted: 30 Dec 2004  

Stephen J. Brammer

University of Bath - School of Management

Chris Brooks

University of Reading - ICMA Centre

Stephen Pavelin

University of Bath - School of Management; University of Reading - Department of Economics

Date Written: December 2004

Abstract

This paper examines the relationship between a firm's reputation and the returns on its shares. We employ a unique dataset from the UK based on ten years of surveys conducted for Management Today, where company directors and analysts at leading investment firms are asked to rate each company in their sector. We consider whether there may be a short-term effect around the time of the announcement and whether longer-term returns are superior for highly ranked firms. We find that while there is little evidence for short-term price pressure around the time of the event, investors who purchase stocks with reputation scores that have risen significantly can make abnormal returns. Consistent with the notion that there is no such thing as bad publicity, we find that firm's whose scores have fallen substantially still exhibit positive abnormal returns in both the short and long run when the market index is employed as a benchmark. However, when a more appropriate comparator is used, evidence of out-performance entirely disappears.

Keywords: Corporate reputation, Management Today Most Admired Firms, stock returns, trading rule performance

JEL Classification: G10, G14, M14, M20

Suggested Citation

Brammer, Stephen J. and Brooks, Chris and Pavelin, Stephen, Corporate Reputation and Stock Returns: Are Good Firms Good for Investors? (December 2004). Available at SSRN: https://ssrn.com/abstract=637122 or http://dx.doi.org/10.2139/ssrn.637122

Stephen Brammer

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
01225 826826, ext. 5685 (Phone)

Chris Brooks (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Stephen Pavelin

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

University of Reading - Department of Economics ( email )

Reading, RG6 6AA
United Kingdom

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