A recent article in World Economics Journal by our friend and colleague, Simon Cole, argues that corporate reputations are among companies’ most valuable assets and, when managed effectively, have the potential to contribute a significant proportion of market capitalization and generate major value.
The article is based on a recent study of the UK commercial property companies; post Lehman (2009-2012). It demonstrated, using econometric analysis*, the growing role of corporate reputation in underpinning shareholder value and confirmed that the investor confidence underlying positive corporate reputation can have a direct influence on share price. Closer analysis revealed that the driving force behind this is the result of a combination of two things: the ‘pull’ of rising investor sensitivity and the ‘push’ of effective reputation management.
Corporate reputation isn’t fixed. It can atrophy if not suitably supported and nurtured and, worse, can even be harmful to performance. Active reputation management is essential and must be responsive to the interests of the investment community as well as to the objectives of management.
This is no less true for the US REIT market than that in the UK and extends to public corporations, in all industries, everywhere.
Armed with the right information we can now determine – where your existing reputation value lies, where are your areas of reputation growth potential, what is the investor mindset into which you must tap, what are the reputation building communication strategies that can help get you where you want to be – there is huge opportunity to increase reputation and in turn shareholder value.
* Econometric analysis combines financial metrics – reported and consensus forecasts for income, balance sheet data and financial ratios such as dividend yields, etc. – with reputational or ‘softer’ data that includes such characteristics as leadership quality, ability to attract talent, capacity to innovate, quality of marketing, and so on.
For more information on corporate reputation valuation please email simon@thackwaymccord.com
