Skip to main content
SpringerLink
Log in

Exploring the Drivers of Corporate Reputation: A Study of Italian Securities Analysts

  • Academic Research
  • Published:
Corporate Reputation Review Aims and scope Submit manuscript

Abstract

Corporate reputation can be broadly defined as a set of collectively held beliefs about a company's ability to satisfy the interests of its various stakeholders. In this paper, we report findings from an empirical study of drivers affecting the judgment of a specific group of stakeholders, that is, securities analysts. Results from a survey of 75 analysts operating on the Milan Stock Exchange indicate that securities analysts tend to judge companies mainly on their financial performance, the configuration of their governance structures, the quality of their financial disclosure and the quality of their leadership and of their prospects for the future.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Figure 1
Figure 2

Similar content being viewed by others

Notes

  1. In an initial stage of analysis, we tentatively retained a Human Asset measure, together with the other dimensions of reputation. Regression analysis, however, showed how the former was not even significantly correlated with our dependent variable (the Emotional Appeal of the firm on its audience), which reassured us about our decision to remove it.

References

  • Asquith, P., Mikhail, M.B. and Au, A.S. (2005) ‘Information content of equity analyst reports’, Journal of Financial Economics, 75, 245–282.

    Article  Google Scholar 

  • Balog, S. (1991) ‘What an analyst wants from you’, Financial Executive, 7, 47–52.

    Google Scholar 

  • Balvers, R.J., McDonald, B. and Miller, R.E. (1988) ‘Underpricing of new issues and the choice of auditors as a signal of investment banker reputation’, The Accounting Review, 63 (4), 605–622.

    Google Scholar 

  • Barber, B., Lehavy, R., McNichols, M. and Trueman, B. (2001) ‘Can investors profit from the prophets? Security analysts recommendations and stock returns’, Journal of Finance, 56, 531–563.

    Article  Google Scholar 

  • Barker, R.G. (1998) ‘The market for information – Evidence from finance directors, analysts and find managers’, Accounting & Business Research, 29 (1), 3–20.

    Article  Google Scholar 

  • Beatty, R.P. and Ritter, J. (1986) ‘Investment banking, reputation, and the underpricing of initial public offerings’, Journal of Financial Economics, 15 (1–2), 213–233.

    Article  Google Scholar 

  • Bonardi, J.P. and Keim, G.D. (2005) ‘Corporate political strategies for widely salient issues’, Academy of Management Review, 43 (3), 435–456.

    Google Scholar 

  • Brammer, S.J. and Pavelin, S. (2006) ‘Corporate reputation and social performance: The importance of fit’, Journal of Management Studies, 43 (3), 435–456.

    Article  Google Scholar 

  • Brown, B. and Perry, S. (1994) ‘Removing the financial performance Halo from Fortune’s “Most Admired” Companies’, The Academy of Management Journal, 37 (5), 1347–1359.

    Article  Google Scholar 

  • Burk, J. (1988) Values in the Marketplace: The American Stock Market under Federal Securities Law, Walter de Gruyter, New York.

    Google Scholar 

  • Carter, R.B., Dark, F.H. and Singh, A.K. (1998) ‘Underwriter reputation, initial returns, and the long-run performance of IPO stocks’, Journal of Finance, 53 (1), 285–311.

    Article  Google Scholar 

  • Carter, R.B. and Manaster, S. (1990) ‘Initial public offerings and underwriter reputation’, Journal of Finance, 45 (4), 1045–1067.

    Article  Google Scholar 

  • Certo, S.T., Daily, C.M. and Dalton, D.R. (2001) ‘Signalling firm value through board structure: An investigation of initial public offerings’, Entrepreneurship: Theory & Practice, 26 (2), 33–50.

    Google Scholar 

  • Chemmanur, T.J. and Paeglis, I. (2005) ‘Management quality, certification, and initial public offerings’, Journal of Financial Economics, 76, 331–368.

    Article  Google Scholar 

  • Conway, J.M. and Huffcutt, A.I. (2003) ‘A review and evaluation of exploratory factor analysis practices in organizational research’, Organizational Research Methods, 6 (2), 147–158.

    Article  Google Scholar 

  • Cooper, R.A., Day, T.E. and Lewis, C.M. (2001) ‘Following the leader: A study of individual analysts’ earnings forecasts’, Journal of Financial Economics, 61, 383–416.

    Article  Google Scholar 

  • D’Aveni, R.A. (1990) ‘Top managerial prestige and organizational bankruptcy’, Organizational Science, 1 (2), 121–142.

    Article  Google Scholar 

  • D’Aveni, R.A. and Kesner, I.F. (1993) ‘Top managerial prestige, power and tender offer response: A study of elite social networks and target firm cooperation during takeovers’, Organisational Science, 4 (2), 123–151.

    Article  Google Scholar 

  • Deeds, D.L., Decarolis, D. and Coombs, J.E. (1997) ‘The impact of firm-specific capabilities on the amount of capital raised in an initial public offering: Evidence from the biotechnology industry’, Journal of Business Venturing, 12, 31–46.

    Article  Google Scholar 

  • Deephouse, D.L. (2000) ‘Media reputation as a strategic resource: An integration of mass communication and resource-based theories’, Journal of Management, 26 (6), 1091–2013.

    Article  Google Scholar 

  • Diamond, D.W. and Verrecchia, R.E. (1991) ‘Disclosure, liquidity, and the cost of capital’, Journal of Finance, 46 (4), 1325–1359.

    Article  Google Scholar 

  • Dollinger, M.J., Golden, P.A. and Saxton, T. (1997) ‘The effect of reputation on the decision to joint venture’, Strategic Management Journal, 18 (2), 127–140.

    Article  Google Scholar 

  • Dowling, G.R. (2001) Creating Corporate Reputations. Identity, Image, and Performance, Oxford University Press, Oxford.

    Google Scholar 

  • Dugar, A. and Nathan, S. (1995) ‘The effects of investment banking relationships on financial analysts’ earnings forecasts and investment recommendations’, Contemporary Accounting Research, 12, 131–160.

    Article  Google Scholar 

  • Epstein, M.J. and Palepu, K.G. (1999) ‘What financial analysts want’, Strategic Finance, 80 (10), 48–52.

    Google Scholar 

  • Fabrigar, L.R., Wegener, D.T., MacCallum, R.C. and Strahan, E.J. (1999) ‘Evaluating the use of exploratory factor analysis in psychological research’, Psychological Methods, 4, 272–299.

    Article  Google Scholar 

  • Fama, E.F. (1970) ‘Efficient capital markets: A review of theory and empirical work’, Journal of Finance, 25 (2), 383–417.

    Article  Google Scholar 

  • Farber, D.B. (2005) ‘Restoring trust after fraud: Does corporate governance matter?’Accounting Review, 80 (2), 539–561.

    Article  Google Scholar 

  • Finkle, T.A. (1998) ‘The relationship between boards of directors and initial public offerings in the biotechnology industry’, Entrepreneurship Theory and Practice, 22 (3), 5–29.

    Google Scholar 

  • Fombrun, C.J. (1996) Reputation: Realizing Value from the Corporate Image, Harvard Business School Press, Cambridge, MA.

    Google Scholar 

  • Fombrun, C.J. (2002) ‘Corporate Reputations as Economic Assets’, in M. Hitt et al. (eds.), Handbook of Strategic Management, Blackwell, Oxford.

    Google Scholar 

  • Fombrun, C.J., Gardberg, N. and Sever, J. (2000) ‘The reputation quotient: A multi-stakeholder measure of corporate reputation’, Journal of Brand Management, 7 (4), 241–255.

    Article  Google Scholar 

  • Fombrun, C.J. and Rindova, V.P. (1994) ‘Reputations as cognitive constructions of competitive advantage’, Paper, Conference on the Cognitive Construction of Industries, Chicago, IL.

  • Fombrun, C.J. and Shanley, M. (1990) ‘What’s in a name? Reputation-building and corporate strategy’, Academy of Management Journal, 33 (2), 233–258.

    Article  Google Scholar 

  • Fombrun, C.J. and van Riel, C.B.M. (2004) Fame and Fortune. How Successful Companies build Winning Reputation, Financial Times Prentice-Hall, New York.

    Google Scholar 

  • Ford, J.K., MacCallum, R.C. and Tait, M. (1986) ‘The application of exploratory factor analysis in applied psychology: A critical review and analysis’, Personnel Psychology, 39 (2), 291–314.

    Article  Google Scholar 

  • Francis, J. and Philbrick, D. (1993) ‘Analysts’ decisions as a product of a multi-task environment’, Journal of Accounting Research, 31, 216–230.

    Article  Google Scholar 

  • Frost, C.A. (1997) ‘Disclosure policy choices of UK firms receiving modified audit reports’, Journal of Accounting and Economics, 23 (2), 163–187.

    Article  Google Scholar 

  • Gioia, D.A. and Sims, H.P. (1986) ‘Cognition-behavior connections: Attribution and verbal behavior in leader-subordinate interactions’, Organizational Behavior & Human Decision Processes, 37 (2), 197–230.

    Article  Google Scholar 

  • Glaser, B. and Strauss, A. (1967) The Discovery of Grounded Theory, Aldine de Gruyter, New York.

    Google Scholar 

  • Hambrick, D.C. and D’Aveni, R.A. (1992) ‘Top team deterioration as part of the downward spiral of large corporate bankruptcies’, Management Science, 38 (10), 1445–1466.

    Article  Google Scholar 

  • Hayes, R.M. (1998) ‘The impact of trading commission incentives on analysts’ stock coverage decisions and earnings forecasts’, Journal of Accounting Research, 36, 299–320.

    Article  Google Scholar 

  • Hayward, M.L.A. and Boeker, W. (1998) ‘Power and conflicts of interest in professional firms: Evidence from investment banking’, Administrative Science Quarterly, 43 (1), 1–22.

    Article  Google Scholar 

  • Hayward, M.L.A., Rindova, V.P. and Pollock, T.G. (2004) ‘Believing one’s own press: The causes and consequences of CEO celebrity’, Strategic Management Journal, 25 (7), 637–653.

    Article  Google Scholar 

  • Healy, P.M. and Palepu, K.J. (1993) ‘The effect of firms’ financial disclosure strategies on stock prices’, Accounting Horizons, 7 (1), 1–11.

    Google Scholar 

  • Higgins, R.B. and Bannister, B.D. (1992) ‘How corporate communication of strategy affects share price’, Long Range Planning, 25 (3), 27–35.

    Article  Google Scholar 

  • Hirsch, P.M. (1972) ‘Processing fads and fashions: An organization-set analysis of cultural industry systems’, American Journal of Sociology, 77, 639–659.

    Article  Google Scholar 

  • Holland, J.B. (1998) ‘Private disclosure and financial reporting’, Accounting and Business Research, 28 (4), 255–269.

    Article  Google Scholar 

  • Jackson, A.R. (2005) ‘Trade generation, reputation and sell-side analysts’, Journal of Finance, 9 (2), 673–717.

    Article  Google Scholar 

  • Kandel, E. and Pearson, N.D. (1995) ‘Differential interpretation of public signals and trade in speculative markets’, Journal of Public Economy, 103 (4), 831–872.

    Article  Google Scholar 

  • Kleinfeld, N.R. (1985) ‘The many faces of the wall street analyst’, New York Times, Sunday, October 27, 1, 1.

    Google Scholar 

  • Knutson, P. (1992) ‘Financial reporting in the 1990s and beyond: A position paper of the Association for Investment Management and Research’, Working Paper, University of Pennsylvania, Philadelphia, PA.

  • Kim, J. and Mueller, C.W. (1978) Factor Analysis. Statistical Methods and Practical Issues, Sage University Paper, Newbury Park, CA.

    Google Scholar 

  • Koch, A. (1999) ‘Financial distress and the credibility of management earnings forecast’, Working paper, Carnegie Mellon University.

  • Kuperman, J.C. (2003) ‘Using cognitive schema theory in the development of public relations strategy: Exploring the case of firms and financial analysts following acquisition announcements’, Journal of Public Relations Research, 15 (2), 117–150.

    Article  Google Scholar 

  • Kuperman, J.C., Athavale, M. and Eisner, A. (2003) ‘Financial analysts in the media: Evolving roles and recent trends’, American Business Review, 21 (2), 74–80.

    Google Scholar 

  • Lang, M. and Lundholm, R. (1993) ‘Cross-sectional determinants of analyst ratings of corporate disclosure’, Journal of Accounting Research, 31 (2), 246–272.

    Article  Google Scholar 

  • Lang, M. and Lundholm, R. (1996) ‘Corporate disclosure policy and analyst behavior’, Accounting Review, 71 (4), 467–492.

    Google Scholar 

  • Lang, M.H., Lins, K.V. and Miller, D.P. (2004) ‘Concentrated control, analyst following, and valuation: Do analysts matter most when investors are protected least?’Journal of Accounting Research, 42 (3), 589–623.

    Article  Google Scholar 

  • La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (1999) ‘Investor protection and corporate governance’, Working paper, http://ssrn.com/abstract=183908.

  • Leuz, C. and Verrecchia, R.E. (2000) ‘The economic consequences of increased disclosure’, Journal of Accounting Research, 38 (3), 91–125.

    Article  Google Scholar 

  • Lev, B. and Penman, S.H. (1990) ‘Voluntary forecast disclosure, nondisclosure, and stock prices’, Journal of Accounting Research, 28 (1), 49–77.

    Article  Google Scholar 

  • Loh, R.K. and Mian, G.M. (2006) ‘Do accurate earnings forecasts facilitate superior investment recommendations?’Journal of Financial Economics, 80, 455–483.

    Article  Google Scholar 

  • Mavrinac, S. (1999) ‘Market development and the Matthew effect: An analysis of reputation, information collection, and seasoning in IPO markets’, Paper presented at the Annual Meetings of the Academy of Management, Chicago.

  • Mazzola, P., Ravasi, D. and Gabbioneta, C. (2006) ‘Building reputation in financial markets’, Long Range Planning 39 (4), 385–407.

    Article  Google Scholar 

  • McGuire, J.B., Schneeweis, T. and Branch, B. (1990) ‘Perceptions of firm quality: A cause or result of firm performance’, Journal of Management, 16 (1), 167–180.

    Article  Google Scholar 

  • Mercer, M. (2004) ‘How do investors assess the credibility of management disclosure?’Accounting Horizons, 18 (3), 185–196.

    Article  Google Scholar 

  • Michaely, R. and Womack, K.L. (1999) ‘Conflict of interest and the credibility of udnerwriter analysts recommendations’, Review of Financial Studies, 12, 653–686.

    Article  Google Scholar 

  • Mikhail, M.B., Walther, B.R. and Willis, R.H. (2004) ‘Do security analysts exhibit persistent differences in stock picking ability?’Journal of Financial Economics, 74, 67–91.

    Article  Google Scholar 

  • Nunnally, J.C. (1978) Psychometric Theory, McGraw Hill, New York.

    Google Scholar 

  • Rao, H. (1994) ‘The social construction of reputation: Certification contests, legitimation, and the survival of organizations in the American automobile industry: 1985–1912’, Strategic Management Journal, 15 (8), 9–44.

    Google Scholar 

  • Rindova, V.P. (1997) ‘The image cascade and the formation of corporate reputations’, Corporate Reputations Review, 1 (1/2), 188–194.

    Article  Google Scholar 

  • Rindova, V.P. and Fombrun, C.J. (1999) ‘Constructing competitive advantage: The role of firm-constituent interactions’, Strategic Management Journal, 20, 691–710.

    Article  Google Scholar 

  • Rosenstein, S. and Wyatt, J.G. (1990) ‘Outside directors, board independence, and shareholder wealth’, Journal of Financial Economics, 26 (2), 175–191.

    Article  Google Scholar 

  • Ross, S.A., Westerfield, R. and Jaffe, J.J. (2005) Corporate Finance, Irwin Series in Finance, WA.

    Google Scholar 

  • Schnietz, K.E. and Epstein, M.J. (2005) ‘Exploring the financial value of a reputation for social responsibility during a crisis’, Corporate Reputation Review, 7 (4), 327–345.

    Article  Google Scholar 

  • Sjovall, A.M. and Talk, A.C. (2004) ‘From actions to impressions: Cognitive attribution theory and the formation of corporate reputation’, Corporate Reputation Review, 7 (3), 269–281.

    Article  Google Scholar 

  • Shapiro, C. (1983) ‘Premiums for high-quality products as returns to reputations’, Quarterly Journal of Economics, 98 (4), 659–679.

    Article  Google Scholar 

  • Stickel, S.E. (1992) ‘Reputation and performance among security analysts’, Journal of Finance, 47 (5), 1811–1836.

    Article  Google Scholar 

  • Stiglitz, J.E. and Weiss, A. (1981) ‘Credit rationing in markets with imperfect information’, American Economic Review, 71 (3), 393–411.

    Google Scholar 

  • Stuart, T.E., Hoang, H. and Hybels, R.C. (1999) ‘Interorganizational endorsements and the performance of entrepreneurial ventures’, Administrative Science Quarterly, 44 (2), 315–349.

    Article  Google Scholar 

  • Useem, M. (1996) ‘Shareholders as a strategic asset’, California Management Review, 39 (1), 8–27.

    Article  Google Scholar 

  • van Riel, C.B.M. and Fombrun, C.J. (2002) ‘Which company is most visible in your country? An introduction to the special issue on the global RQ-Project nominations’, Corporate Reputation Review, 4 (4), 296–302.

    Article  Google Scholar 

  • Verrecchia, R.E. (1981) ‘On the relationship between volume reaction and consensus of investors: Implications for interpreting tests of information content’, Journal of Accounting Research, 19 (1), 271–284.

    Article  Google Scholar 

  • Welbourne, T.M. and Cyr, L.A. (1999) ‘The human resource executive effect in initial public offering firms’, Academy of Management Journal, 42 (6), 616–629.

    Article  Google Scholar 

  • Womack, K.L. (1996) ‘Do brokerage analysts’ recommendations have investment value?’Journal of Finance, 51 (1), 137–167.

    Article  Google Scholar 

  • Zattoni, A. (1999) ‘The structure of corporate groups: The Italian case’, Corporate Governance – An International Review, 7 (1), 38–49.

    Article  Google Scholar 

  • Zuckerman, E.W. (1997) ‘Mediating the Corporate Product: Securities Analysts and the Scope of the Firm’, Dissertation, Department of Sociology, University of Chicago.

  • Zuckerman, E.W. (1999) ‘The categorical imperative: Securities analysts and the illegitimacy discount’, The American Journal of Sociology, 104 (5), 1398–1438.

    Article  Google Scholar 

Download references

Acknowledgements

We thank Charles Fombrun for his insightful advice in the early phases of this research project.

Author information

Authors and Affiliations

  1. Economics and Marketing Department, IULM University, Milan, Italy

    Claudia Gabbioneta

  2. Institute of Strategic Management, Università Bocconi, Milan, Italy

    Davide Ravasi

  3. Economics and Marketing Department, IULM University, Milan, Italy

    Pietro Mazzola

Authors
  1. Claudia Gabbioneta
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Davide Ravasi
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Pietro Mazzola
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Gabbioneta, C., Ravasi, D. & Mazzola, P. Exploring the Drivers of Corporate Reputation: A Study of Italian Securities Analysts. Corp Reputation Rev 10, 99–123 (2007). https://doi.org/10.1057/palgrave.crr.1550048

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/palgrave.crr.1550048

Keywords

Search

Navigation