The Impact of Reputation on Market Value

Simon Cole

Published: September 2012

Corporate reputations are one of the best known but least understood company assets. Few investment analysts would argue that they have no value but at the same time would struggle to put figures on how much. This paper dispels the myth that intangible means immeasurable. It provides an objective analysis of the scale of the shareholder value tied up in the reputations of many of the largest US and UK public companies. Moreover, it argues that critical understanding of the sources and drivers of reputation value can help corporate leaders to better manage their assets and investors to make more informed decisions.

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Corporate reputations rank amongst companies’ most valuable assets. They are delivering substantial proportions of their market capitalisations and are a major source of value generation. Their significance is being felt in a wide variety of business sectors including real estate and in particular Real Estate Investment Trusts (REITs) where, as this paper demonstrates, they have become critical drivers of shareholder value as investors increasingly find the surveyor estimates of underlying asset values wanting. This is having significant implications on how, for example, REITs need to manage their corporate reputations and deploy the likes of reputation value analysis to ensure that the messaging they’re delivering is both securing and growing corporate value.

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