Thursday, November 17, 2005

New research: good reputation can improve share price

Valuing intangible assets such as a company's reputation, has always been challenging. In an economic climate where everything must be tied back to the bottom line, even the issue of "reputation" comes under scrutiny.

The question, "what is the value of having a good reputation?" is one that communications professionals are often asked to answer. While they intrinically know that a good reputation attracts better employees, drives sales and improves relationships with all key stakeholders, it can be an ongoing battle to get the budget to fund the activities that nurture their company's reputation.

Factiva and Investor Dynamics recently commissioned research that investigated the financial link between good corporate reputation and share price.

Conducted by MBA graduate students at the London Business School, the research found that good corporate reputation can directly contribute to the value of the business. The research indicates that investors who base their portfolio buying on companies with strong reputation reap on average 1% per month excess risk-adjusted return.

Check out the white paper which details the research. It's a great supporting resource for anyone who plays some part in managing their company's reputation.


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