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Fortune's most admired firms: An investor's perspective
Abstract
Each year since 1983, Fortune magazine has published a survey featuring “America's most admired” corporations. Although the most admired corporations are certainly worthy of some praise and the least admired deserving of criticism, whether these admired companies are worthy of investors' money is less clear. We examine the ex ante and ex post returns of a sample of the most and least admired corporations in the Fortune survey.
... Fortune magazine's "America's Most Admired Companies") on share price performance. Notable studies find that the stocks of the most admired firms, as identified by the Fortune survey, outperform those of the least admired (Antunovich, Laster, & Mitnick, 2000;Filbeck, Gorman, & Preece, 1997) and/or market indices (Filbeck et al., 1997;Vergin & Qoronfleh, 1998). Chung, Eneroth, and Schneeweis (2003), on the other hand, find little evidence that highly rated firms outperform those that are less admired on a risk-adjusted basis. ...
... Fortune magazine's "America's Most Admired Companies") on share price performance. Notable studies find that the stocks of the most admired firms, as identified by the Fortune survey, outperform those of the least admired (Antunovich, Laster, & Mitnick, 2000;Filbeck, Gorman, & Preece, 1997) and/or market indices (Filbeck et al., 1997;Vergin & Qoronfleh, 1998). Chung, Eneroth, and Schneeweis (2003), on the other hand, find little evidence that highly rated firms outperform those that are less admired on a risk-adjusted basis. ...
... Our findings are rather different to those by and Filbeck et al. (1997), where high scores on the Fortune survey led to positive abnormal returns. As well as the differing methodology used to construct abnormal returns, this difference in results may also be attributable to the relatively larger readership of this magazine compared with Business Ethics. ...
... An ROI-based thinking, Drucker warns, is reminiscent of the invalid nineteenth-century mentality that lower costs alone differentiate successful businesses and further drive their success. Further evidence for the inadequacy of conventional accounting metrics is provided by a recent study (Filbeck, et al., 1997) that examined the ex ante and ex post returns of a sample of the most and least admired corporations in the Fortune 500 list. In a large proportion of time periods, the portfolio of most admired stocks outperforms the market and the least admired portfolio, both in raw returns and after adjusting for both systematic and total risk. ...
... In a large proportion of time periods, the portfolio of most admired stocks outperforms the market and the least admired portfolio, both in raw returns and after adjusting for both systematic and total risk. (Filbeck, et al., 1997). ...
An analysis of current value metrics such as NPV, ROI analysis and future value accounting reveals inherent bias towards financial and economic variables. This paper examines these biases and identifies limitations of metrics such as Tobin's Q, bench marking and information economics-based measures. An analysis of extant metrics research and applications provides a basis for assembling four key requirements for electronic commerce metrics. Our thesis that financial and economic measures alone do not accurately measure the value of EC investments is further supported by market valuation data of several companies engaged in electronic commerce. This paper proposes a composite metric for evaluating value of electronic commerce activities of firms using an extension of the balanced scorecard approach. We also describe how the perspective of the online customer, knowledge integration and management, Internal business processes and traditional financial metrics can be simultaneously tracked using the EC balanced scorecard proposed here.
... Our paper contributes to the literature in several fronts. It is part of the growing finance literature on the relationship between intangibles –like corporate reputation-and stock market valuation (Filbeck et al., 1997; Preece and Filbeck 1999; Filbeck and Preece 2003) Filbeck, Gorman, and Preece (1997) study the stock market effect of belonging to America's most admired companies. Filbeck and Preece (2003) analyze the market reaction to the inclusion of a firm on Fortune's Best 100 Companies to work for in America. ...
... Our paper contributes to the literature in several fronts. It is part of the growing finance literature on the relationship between intangibles –like corporate reputation-and stock market valuation (Filbeck et al., 1997; Preece and Filbeck 1999; Filbeck and Preece 2003) Filbeck, Gorman, and Preece (1997) study the stock market effect of belonging to America's most admired companies. Filbeck and Preece (2003) analyze the market reaction to the inclusion of a firm on Fortune's Best 100 Companies to work for in America. ...
A Global Brand is a firm that leverages its own brand to sell a large array of products in many markets (e.g. Nestlé), compared to another firm, possibly global as well, that prefers to sell under many, sometimes local, smaller brands (e.g. Unilever). This paper analyzes the operating, financial, and market performance of firms included in Interbrand’s 100 Global Brands during the period 2001-2008. The market valuation of intangibles - in particular of brands - has been extensively studied in the literature. These intangibles (brand, intellectual property, employee satisfaction) are inherently valuable. However, only certain firms in an industry implement a Global Brand strategy, so our hypothesis is that any advantage of such strategy has to be eliminated in equilibrium. Our results confirm that Global Brands do not earn significantly higher stock returns. They have larger marketing and R&D expenses. However, their EBIT margins are overall higher, suggesting that global brand firms are priced higher because of their better acceptance among consumers. Additionally, Global Brands sell more per unit of capital (asset turnover), thus resulting in significantly higher return on operating assets. Global Brands take on less debt than other firms because they base their performance on a highly valuable, yet intangible asset, and we indeed confirm that the market-to-book ratio of GB is significantly higher. However, we also show that GB do not display significant risk-adjusted excess returns. The benefit of GB lies on them being low-beta stocks, safe havens in periods of market volatility when diversification is most needed.
... Studies that deal directly with Fortune's other corporate awards are numerous. Both Vergin and Qoronfleh (1998) and Filbeck, Gorman and Preece (1997) have studied the performance of Fortune's 'Most Admired Firms.' Both studies find that the most admired firms do indeed outperform the market. ...
... Hamilton, Jo and Statman (1993) and Preece and Filbeck (1999) find that portfolio returns of socially responsible mutual funds and family-friendly firms, respectively, are statistically indistinguishable from the overall market. Our results are consistent with Filbeck, Gorman and Preece (1997) and Vergin and Qoronfleh (1998) who find that Fortune's 'Most Admired Firms' do outperform the market. Is the information in the '100 Best Firms to Work For in America' award different from that of other awards or is Fortune so much more widely read by investors than publications like Working Mother that investors buy on the announcement, regardless of the ranking criteria? ...
In this paper we examine the market reaction to the announcement by Fortune of the ‘Best 100 Companies to Work for in America.’ Employees rate firms based on several criteria including trust in management, pride in work/company and camaraderie. To examine long-term performance, we calculate raw and risk-adjusted returns and then compare them to the returns of a matched sample of firms. In addition, we calculate the return on a buy and hold investment in the sample firm less the return on a buy-and-hold investment in a matched sample firm (BHARs). We find a statistically significant positive response to the announcement of the ‘100 best companies to work for’ by Fortune. Also, based on all measures of risk-adjusted return, we find these firms generally outperform the matched sample of companies. The BHAR results, although not exhibiting the level of statistical significance, are consistent with the raw and risk-adjusted return results.
... Notable studies find that the stocks of the most admired firms, as identified by Fortune's survey, outperform those of the least admired (Antunovich et al., 2000;Filbeck et al., 1997) and/or market indices (Filbeck et al., 1997;Vergin and Qoronfleh, 1998). Chung et al. (2003), on the other hand, find little evidence that highly rated firms outperform the less admired on a risk-adjusted basis. ...
... Notable studies find that the stocks of the most admired firms, as identified by Fortune's survey, outperform those of the least admired (Antunovich et al., 2000;Filbeck et al., 1997) and/or market indices (Filbeck et al., 1997;Vergin and Qoronfleh, 1998). Chung et al. (2003), on the other hand, find little evidence that highly rated firms outperform the less admired on a risk-adjusted basis. ...
We consider the stock performance of America's 100 Best Corporate Citizens following the annual survey by Business Ethics. We examine both possible short-term announcement effects around the time of the survey's publication, and whether longer-term returns are higher for firms that are listed as good citizens. We find some evidence of a positive market reaction to a firm's presence in the Top 100 firms that are made public, and that holders of the stock of such firms earn small abnormal returns during an announcement window. Over the year following the announcement, companies in the Top 100 yield negative abnormal returns of around 3%. However, such companies tend to be large and with stocks exhibiting a growth style, which existing studies suggest will tend to perform poorly. Once we allow for these firm characteristics, the poor performance of the highly rated firms declines. We also find companies that are newly listed as good citizens and companies in the Top 100 but outside the S&P 500 can provide considerable positive abnormal returns to investors, even after allowing for their market capitalization, price-to-book ratios, and sectoral classification.
... In order to answer these questions, websites were analyzed across different industry sectors and reputation levels based on their functionalities as measured with a descriptive taxonomy of customer needs amenable to online fulfillment (Piccoli, Brohman, Watson and Parasuraman, 2004). Industry sectors and firm reputation levels (classified as either admired or contender) were identified based on a list of Fortune Magazine's most admired firms 1 , which has been widely used in prior reputation studies (e.g., Filbeck and Preece, 1995;Roberts and Dowling, 2002;Filbeck, Gorman, and Preece, 1997;Brown and Perry, 1994). We believe that the results of this study will help researchers extend intuitional theory to other IT artifacts. ...
... This categorization has been widely used in corporate reputation studies (e.g., Filbeck and Preece, 1995;Roberts and Dowling, 2002;Filbeck et al., 1997;Brown and Perry, 1994Of the industry sectors listed in Fortune's 2007 publication, eight were carefully selected by the authors based on two criteria to reduce the potential for bias due to the type of websites and firms' online activities. These criteria include (1) leading industry sectors known to actively adopt IS (Chiasson and Davidson, 2005) and (2) a classification of commercial websites (Hoffman, Novak, and Chatterjee, 1995) as explained below. ...
Websites as an IT artifact have been utilized by companies for over a decade. The structure of websites may show isomorphic patterns, explainable by the conformity of firms to institutional pressures. However, there is insufficient evidence in prior literature to confirm the existence of such patterns. Following institutional theory, we examined website structures of firms. We selected industry sectors and firm reputation levels as institutional forms. Based on a sample of 28 Fortune 500 firms, we conducted content analysis using a descriptive taxonomy provided by Piccoli et al. (2004). The results revealed 1) that websites of firms are isomorphic within an industry sector, but polymorphic across industry sectors, and 2) websites of firms do not differ across reputation levels. These results are discussed in depth, and managerial implications are suggested.
... Örgütsel imaj, birçok örgüt için önemlidir çünkü bugünkü performansları ve hayatta kalmaları, büyük ölçüde sayısız paydaşla ilgili itibarlarına bağlıdır (Fombrun, 1996;Roberts & Dowling, 2002). Özellikle, iyi bir imaja sahip örgütler, yatırımcıları ve müşterileri çekme ve elde tutma konusunda rekabetçi bir kaldıraca sahip olabilir (Ahearne, Bhattacharya &e Gruen, 2005;Filbeck, Gorman & Preece, 1997). ...
Örgütler varlıklarını sürdürebilmek için dış dünyaya ihtiyaç duymaktadır. Dış dünyaya yansıttıkları olumlu sinyaller örgütlerin tercih edilmeleri açısından önemli görülmektedir. Bu sebeple dış görünüşlerine dikkat etmektedirler. Bu dış görünüşleri ile alakalı literatürde karşımıza örgütsel saygınlık, örgütsel imaj, örgütsel kimlik ve örgütsel itibar kavramları çıkmaktadır. Ancak, örgütsel literatürde yer alan örgütsel saygınlık, örgütsel imaj, örgütsel kimlik ve örgütsel itibar kavramlarının araştırmalarda kullanımlarında teorik olarak bir tutarlılık olmadı, birbirinin yerine veya eş anlamlı olarak kullanımları dikkat çekmektedir. Bu sebeple bu çalışmanın amacı, örgüt literatüründe kullanılan bu kavramların teorik çerçevesinin oluşturulması ve bu kavramların tanımlarında veya kullanımındaki yanlışlıkların düzeltilmesi için araştırmacılara yol göstermek olarak belirlenmiştir. Bu araştırmada; örgütsel saygınlık, örgütsel imaj, örgütsel kimlik ve örgütsel itibar kavramları hakkında terminolojik tanımlara, yapılmış olan çalışmaları sentezleyerek aktarımlarına yer verilmektedir. Böylelikle literatürde yer alan yanlış veya yerine kullanımların önüne geçilmesi hedeflenmiştir.
... However, studies on this assumption within the scope of financial services are quite limited. Some research results reveal that businesses with strong reputations, which can be also accepted as customer-oriented, earn more income, have a higher market value of stocks, and have sustainable growth potential (Chung et al., 1999;Filbeck et al., 1998;Filbeck & Preece, 2003;Fryxell & Wang, 1994;Podolny & Phillips, 1996;Roberts & Dowling, 2002;Rose & Thomsen, 2004;Srivastava et al., 1997;Vergin & Qoronfleh, 1998).On the other hand, there is no study in the literature examining the effect of customer orientation on employer image. Factors associated with functional utility in banking services are the precursors that attract the attention of potential customers (Zameer et al., 2015). ...
... On the same subject (Filbeck, Gorman, & Preece, 1997)) have found that investments on companies which have been well managed have a higher probability in achieving better results. Also, investors who have a well-diversified portfolio and capitalize it in successful companies are more exposed to higher returns. ...
This work uses a simultaneous equation system approach to analyze the relationship between the management and business quality of companies and their market price quality. Using panel data we found that both the management and the business quality of companies positively influence the market price quality of the studied American companies. Additionally, variables like the actual position of the company price quality compared to the industry average, being on the top or the bottom, or the beta value of a company, also influence the market price quality of the respective company. It is shown that the system equation approach is the most appropriate to explain the linkages between price, business, and management quality providing consistent estimates. Also, using ratings to express the three core variables in the system is the most adequate way to define the quality characteristics in terms of price, management, and business performance of the companies considered in this study.
... Studies of Fortune's other corporate awards are numerous and offer mixed results. Filbeck et al. (1997) and Anderson and Smith (2006) study the performance of Fortune's ''Most Admired Companies'' (MAC) and find that MAC firms do indeed outperform the market. Statman et al. (2008) find opposite results. ...
Since 1997, CFO Magazine has published a ranking of 1000 companies in its “Working Capital Scorecard.” Our research explores the question as to whether working capital management practices based on the accounting metrics used by CFO Magazine serve as a basis for investor-based strategies for superior return generation. We examine the stock performance of top ranked companies from 1997 to 2012 against benchmark portfolios. Controlling for market, market capitalization, book to market, momentum factors, liquidity factors, and corporate governance; the higher ranked firms produce statistically higher excess returns than bottom ranked firms. In bull market periods, firms with superior working capital management outperformed their counterparts on a raw and risk-adjusted basis. These top ranked firms also provide statistically significant active returns regardless of market cycle. In sum, our results indicate that shareholders reward firms with superior working capital management strategies with higher raw and risk-adjusted performance over longer holding periods across the economic cycle especially in bear markets cycles.
... Studies that deal directly with Fortune's other corporate awards are numerous. Filbeck, Gorman and Preece (1997) and Vergin and Qoronfleh (1998) study the performance of Fortune's "Most Admired Firms."Both studies find that the most admired firms do indeed outperform the market. ...
We examine the abnormal returns around the publication dates of the Barron World’s Best CEOs issues along with longer-term, risk-adjusted performance. One specific focus of the paper is whether the inclusion in the Barron ’s survey leads to an increase in positive “affect” of the firms as suggested by Statman, Fisher, and Anginer (2008) in the case of Fortune ’s most admired firms. In addition, we explore the effect of the listing on the compensation of CEOs included in the ranking. We find a negative share price response to the release of Barron’s list. The Best CEOs portfolio return is indistinguishable from the S & P 500 on a longer-term basis, and it underperformed against constructed matched samples, with no differences in risk adjusted returns. Profitability did not increase for selected firms in the post-announcement period and no patterns exist in terms of changes in CEO compensation are associated with the CEO’s inclusion in Barron’s list.
... In addition they show that a firm's past financial performance is more closely related to corporate social responsibility than is their performance after being recognized as an admired company. However, Antunovich, Laster and Mitnick (2000) and Filbeck, Gorman, and Preece (1997) find that stocks of most admired firms outperform those of least admired firms. Similarly, Vergin and Qoronfleh (1998) find that stocks of most admired firms exhibit favorable stock market performance. ...
Greening has become a powerful idea in corporate strategy. Firms engaged in greening often seek and cherish external validations such as being an active participant in UN’s Global Compact. This paper examines the investment performance of firms who were named in Newsweek's annual survey of most green companies. Results show that there is no direct relationship between a higher Newsweek Green Ranking and performance. However, firms after being named in the Newsweek survey had better return performance than in the year prior to being named although this difference in return was not statistically significant. The results are nonetheless important as it allows investors to separate good external validators of greening from those external validators who may have wide media recognition but are a perhaps a lagging indicator of greening.
... A number of studies, typically employing the overall rankings from Fortune magazine's America's Most Admired Survey of Corporate Reputations, claim investors can outperform the market by investing in the stocks of firms with the highest management reputations. However, the studies of Preece (1995 and) and Filbeck et al. (1997) are based on a single year's survey and lack any industry adjustment or appropriate benchmarking. Antunovich et al. (2000) use Fortune surveys and rankings from 1983-1995 inclusive and report outperformance by their top decile firms over a five-year holding period. ...
Using a unique database of management quality ratings over a 17 year period, we find that while good management appears to be associated with lower subsequent market returns, this is entirely consistent with an informationally efficient market. Quality of management is value relevant in that better managed firms have lower cost of equity, more stable earnings, higher profitability that persists over time, and higher market valuations using the Ohlson (1995 and 2001) method. Potentially endogenous relationships are unlikely to be driving our results. While well managed firms are ‘good firms’, contrary to the belief of many market participants their stocks perform no better than those of poorly managed firms.
... Numerous prior studies suggest that being on the MA List is economically significant. For example, prior studies find that companies on the MA List earn higher returns than those not on the List (Filbeck et al. 1997; Antunovich et al. 2000; Anderson and Smith 2006) and are less likely to suffer stock price declines during bad economic times (Jones et al. 2000). In addition, investors are more tolerant of higher systematic (non-diversifiable) risk companies with higher MA scores (Srivastava et al. 1997). ...
In this study, we explore the association between company reputation and the likelihood of a financial statement restatement (i.e., a revealed misstatement). We focus on restatements because they are one of the most visible forms of impaired financial reporting quality, and we suggest that company reputation concerns will influence the reporting process and reduce financial statement misstatements (and ultimately restatements). We proxy for company reputation using measures based on Fortune’s America’s Most Admired Companies List. For a sample of 8,081 observations from 1995 through 2009, we find that companies with higher reputation scores are less likely to misstate their financial statements after controlling for CEO tenure, corporate governance, and audit fees (a proxy for audit effort). In addition, we find that companies with higher reputations have better accruals quality. We also find that company reputation is positively associated with audit fees even after controlling for corporate governance. These results are consistent with company reputation having an important effect on financial reporting quality and with the effect of reputation being distinct from that of corporate governance.
... Our results are consistent with the literature that finds superior abnormal returns for highly rated companies in Fortune " s " America " s Most Admired Companies " survey (Filbeck et al., 1997; Filbeck and Preece, 2003; Antunovich et al., 2000; Anderson and Smith, 2006). Consistent with the predictions of information risk and agency theories, which together propose that enhanced corporate communications will reduce information risk or agency problems caused by high information asymmetry, we find that nominated firms experience an increase in stock liquidity, and a lower cost of equity capital. ...
In this first study to test formally the market value of investor relations (IR) activity, we employ the annual US Investor Relations Magazine Investor Relations Awards from 2000 to 2002 to proxy for the quality of firm investor relations. We find firms perceived to have the most effective IR strategies earn superior abnormal returns, both before and after the nominations. This shows that while the nominations themselves may be influenced by past performance to some extent, they are nonetheless also associated with subsequent positive abnormal returns. We also find that not surprisingly, higher analyst following is associated with more nominations suggesting analysts tend to favour the stocks they follow. Consistent with effective IR leading to lower information risk, liquidity of nominated firms increases in the year subsequent to the nominations. Overall, our evidence is consistent with effective IR successfully reducing risks associated with high information asymmetry, as predicted by information risk and agency theories.
... Organizational image has become of prime importance for many Wrms because their performance and survival today depend in large part on their reputation with respect to numerous stakeholders (Roberts & Dowling, 2002). SpeciWcally, Wrms with a good image might have a competitive leverage in attracting and keeping investors and customers (Ahearne, Bhattacharya, & Gruen, 2005;Filbeck, Gorman, & Preece, 1997). Though external in nature, organizational image also has an inXuence, albeit indirect, on employees, as they receive and interpret various messages from diverse external constituencies and from these messages, they form an opinion about how outsiders perceive the company (Smidts, Pruyn, & van Riel, 2001). ...
Recent research has highlighted the importance of understanding the influence of an organization’s external image on its members. Although progress has been made in understanding how perceived external prestige relates to workplace outcomes, researchers have not examined the joint effect of perceived external prestige and individual differences on such outcomes. In this article, we tested the impact of perceived external prestige on turnover intentions, but we also assumed that this influence is moderated by individuals’ need for organizational identification. Using three samples and a longitudinal research design, we found consistent support for this assumption. These results provide empirical support for the theoretical integration of social identity and need-based motivation theories.
... For instance, weak relationships were found between firms' qualitative attributes and future accounting performance (e.g., sales growth and operating income) and little correlation was found between firms' perceived management quality and future market excess return. However, Filbeck et al. (1997) and Antunovich et al. (2000) find that stocks of most admired firms outperform those of least admired firms. Similarly, Vergin and Qoronfleh (1998) find that stocks of most admired firms exhibit favourable stock market performance. ...
We investigate the relationship between a firm's degree of social responsibility and its performance. To accomplish this objective, we examine the stock market reaction to the announcement of Fortune magazine's list of 100 Best Companies to Work For over the 1998-2003 period. We find significant positive excess returns, which indicate that being included on the list is viewed positively by the stock market. To explain the positive abnormal performance, we regress the excess returns against firm-specific variables. Excess return has a positive relation to the job growth rate, but not to firm rank, on a pre-listing basis. However, the additional analysis reveals that the firms with a more favourable ranking are relatively small and have a higher job growth rate, low employee turnover, high betas and extremely positive stock market performance prior to their inclusion on the list. In the year following the publication, sample firms with a favourable ranking have higher sales and gross profit margin than their lower-ranked counterparts. Overall, the results indicate that firms exhibiting a high degree of social responsibility towards their employees are positively rewarded by stock market participants, and that the rankings are somewhat related to pre- and post-survey financial performance.
... Hamilton, Jo, and Statman provided evidence that socially-responsible mutual funds do not earn statistically significant excess returns and that their performance was not statistically different from the performance of conventional funds. Gorman, Filbeck, and Preece (1997) studied the returns from investing in a portfolio of the companies on Fortune's most-admired list. They compared the returns of the "mostadmired" firms (the firms at the top of the Fortune list) to the "least-admired" firms (the firms on the bottom of the Fortune list) and to the S & P 500. ...
Abstract In this paper we,examine,the returns to a portfolio of 29 firms,that are perceived,as family-oriented. The sample,is based on firms,awarded,the best 100 companies,for working mothers,in Working,Mother,Magazine’s annual,survey. There is much,anecdotal,evidence supporting the benefits of these programs, but little evidence relating family-oriented policies to shareholder wealth. We find, based on raw returns, that family-friendly firms do not earn statistically significant excess returns relative to a matched,sample or to th eS&P,500. Based on risk-adjusted returns, the family-friendly portfolio outperforms the market, but underperforms a matched,sample portfolio. © 1999 Elsevier Science Inc. All rights reserved. JEL classification:G10; G11 Keywords: Family friendly firms; Portfolio returns; Risk-adjusted returns
Purpose
This research explores whether Glassdoor's annual rankings of the Best Places to Work provide meaningful information to shareholders in identifying companies with the potential for superior future performance. Because their website reaches over 64 million unique visitors monthly, Glassdoor rankings can influence trading patterns. Glassdoor’s awards offer a unique way to analyze employees' feedback as there is no self-nomination process or cost involved, differentiating it from other measures of job satisfaction such as Fortune’s Best Companies to Work For survey.
Design/methodology/approach
We compare holding period returns of the Best Companies firms to the performance of the S&P 500 index and three separately constructed matched benchmark portfolios. We calculate cumulative raw, risk-adjusted, and abnormal returns based on a buy-and-hold strategy as well as by using the Fama-French (1993) 3-factor and 4-factor models. We also analyze whether selected companies have higher performance one year after the announcement. We control for possible endogeneity problems.
Findings
We find mixed evidence regarding the superiority of the Best Company firms in holding period returns and risk-adjusted measures compared to appropriate benchmarks. Longer-term cumulative raw returns show that they have higher annual returns compared with its benchmarks. The differences are not statistically significant on a raw or risk-adjusted basis.
Research limitations/implications
The Best Companies sample is much larger than the matched sample, even with multiple matching methodologies. This difference is limited by the survey design as the employees of larger companies tend to post in Glassdoor survey. Also, since companies in the small Best Companies sample are private companies, comparing their stock performance with comparable companies is challenging.
Practical implications
Human resource management theories argue that job satisfaction results in enhanced corporate performance. However, verification of such satisfaction by a Glassdoor, as a third-party survey, does not necessarily lead to higher risk-adjusted share price performance.
Originality/value
We extend previous work that focuses on analyzing employee reviews to consider the impact of being ranked among the best companies on the survey. Second, we employ an extended set of financial performance measures to assess impact. Our analysis also employs a wider range of financial performance metrics and robustness tests.
In 2015, Glassdoor published its first international Best Places to Work list in the United Kingdom. Since then, Glassdoor has begun publishing 10 different Best Places to Work lists in 9 different countries. Glassdoor's Best Places to Work lists are unique in that rankings are solely based upon employee reviews and are not influenced by self‐nominations or a cost paid by a company. With 64 million unique visitors each month, these Glassdoor lists have the potential to impact investors. In this paper, we explore whether firms appearing on lists for Canada, France, Germany and the United Kingdom result in short‐term announcement effects or long‐term abnormal returns on a raw‐ and risk‐adjusted basis. We find that the Canadian sample earns statistically significant abnormal returns in the announcement window 5 days after the announcement date. In the long run, we find that the Canadian sample also outperforms its matched sample and local index on a risk‐based basis.
Dividend-yield strategies generate investor interest because they have historically offered better risk-adjusted performance. We test the performance the Dogs of the Dow (DoD) strategy, one of the most prevalent dividend-yield strategies, using Fortune’s Most Admired Companies (MAC) by comparing the performance of a top 10% dividend-yield MAC portfolio (MAC Dogs) to the returns on the Dow Jones Industrial Average (DOW), the standard DoD strategy, and two benchmarks (the overall MAC portfolio and the S&P 500 Index). We find that the MAC Dogs provide significantly higher raw returns than both the DOW and the standard DoD strategy. Moreover, the MAC Dogs provide significantly higher raw and risk-adjusted returns against our benchmarks. Our results remain robust when using either alternative dividend-yield cutoff points or alternative event windows surrounding the issue dates for Fortune. Finally, we show that the average monthly returns are higher for the MAC Dogs than for either benchmark regardless of positioning in an economic cycle. Our results contribute to the existing DoD literature by expanding the strategy beyond application to traditional indexes. Specifically, we use a unique and replicable grouping of stocks based on MAC and offer support for a link between financial and social performance.
The California Public Employees Retirement System (CalPERS) has over $ 200 billion in assets. Over the years it has gained an activist reputation. The size of investment provides it with a strong voice and the incentive to incur monitoring costs. CalPERS nudges the management and the board to act in the best interest of the shareholders. CalPERS regularly examines its portfolio and seeks change in firms that can potentially perform better. Some firms heed to this attention while those that ignore the attention end up on the focus list. This study examines the reaction of the market to the publishing of the CalPERS focus list. On one hand, an investor could interpret this news positively: A large shareholder is actively pushing management and the board, to improve operations. In the remaining sections, the literature is reviewed, we present our results and the paper ends with a discussion.
Corporate Reputation (CR) is a critical intangible asset for a firm. As a representation of its past actions and results, CR encompasses a number of features which conform the status of a firm regarding its competitors. This helps corporations not only to gain competitive advantages, but also to survive in times of economic turbulences. Despite its apparent relevance, it remains inconclusive and controversial whether CR affects firms' financial performance, a key point for current and potential investors. Our aim is to provide new evidence that could shed some light in determining the role of CR in stock market valuation. Since most of the previous research focus on this relationship using Multiple Regression (MR), it has been suggested that more conclusive results could be achieved using neural networks, but it has not been proven yet to the best of our knowledge. Using a sample of Spanish listed companies in the period 2008-2011, MR and a neural network technique, Generalized Regression Neural Network (GRNN), have been used. At an empirical level, results show that the mere presence of a firm in a reputation ranking has a positive impact on its market value, and that also a higher CR have a favorable influence on financial performance. At a methodological level, results of GRNN have proven to be more robust than those obtained using traditional MR.
One criterion for Fortune magazine's selection of “the world's most admired firms” is that these firms have the “guts” to “take risks so bold that they may cause shareholders to question their sanity.” The question posed in this article is whether investors would be sane to select these firms for their portfolios. The authors investigate the raw and risk-adjusted returns of the selected industry leaders over single- and multiple-year holding periods prior to and after the survey's release, and test whether an announcement effect occurs around the public release of the survey. The results indicate that while these firms do outperform the S&P 500 over most time periods, their returns do not differ from a more appropriate matched sample, based on market capitalization and SIC codes. There is little evidence of a market reaction to the survey's release.
In 1994, James Collins and Jerry Porras extolled the virtues of a selected group of visionary companies in Built to Last. Whether these visionary companies are good of investments is not clear. Collins and Porras find that their visionary firms outperform a “less visionary” comparison group and the market index through 1990. We can confirm Collins and Porras's results on a raw and risk-adjusted basis for the years prior to the completion of their work, but the relationship weakens for the years following. And using market capitalization and SIC code benchmarks, we find little support for the superiority of these companies prior to or after the Collins-Porras study.
Corporate reputation is a complex concept, involving several related but separate dimensions being a hybrid intangible asset that is managed internally but largely assessed externally by different audiences/stakeholders.
In this study, we investigate the performance of firms selected to Barron’s Most Respected Companies against the S&P 500 and a matched sample over a short‐term, long‐term and operational basis. The most respected companies exhibit a statistically significant announcement effect associated with their selection and outperform the S&P 500 over longer‐holding periods. The overall sample and those firms identified as top picks outperform a matched sample of firms. In addition, as measured by changes in the return on assets, the post‐selection operational performance of the most respected firms was better than that of the matched firms.
In this paper, we explore the cumulative and interactive effects from being listed on one or more of four popular annual surveys (Fortune’s “Most Admired Companies” and “100 Best Companies to Work For,” Business Ethics “Best Corporate Citizens,” and Working Mother’s “100 Best Companies for Working Mothers.”) We find portfolios constructed of firms selected across these surveys add value to a portfolio, initially and over longer-holding periods, but the overall results are driven by the performance of those firms selected from the Most Admired Companies and Best Corporate Citizens rankings. We also discover that being listed in two or three different surveys on a yearly basis produces incremental value.
Grouping of Blue Chip companies has become a popular pastime. But bringing together Kwik Save, Tarmac, Ladbrokes and National Grid as a group of superior performing companies perhaps stretches the imagination a little. To suggest further that Cadbury, Tesco, BP and Reuters are myopic might challenge preconceptions. This however is the finding of information gathered from Britain's top senior executives. The article highlights the self-perceptions by senior executives of their company's performance and compares this with the perceptions of other senior executives and expert analysts. The results highlight the contrariness that exists between the UK's senior managers and suggests that this is a further reason for the UK's failure to close the international competitiveness gap.
Purpose
Jim Collins' Good to Great is but one of many popular press books on management. In his book, Collins discusses the keys to success for today's corporations. Many managers flocked to bookstores to discover what they might be missing in making their organization great. This paper aims to use methodologies more commonly found in the finance literature to validate the results of Collins' study.
Design/methodology/approach
This paper uses methodologies more commonly found in finance literature (e.g. event study methodology, Fama‐French three‐factor model with momentum, buy‐and‐hold abnormal returns) to validate the results of Collins' study.
Findings
The results show that the Good to Great firms had unexceptional performance when compared to other benchmark lists of firms, on an ex‐ante or ex‐post basis.
Practical implications
From a management perspective, the advice that one might obtain from Good to Great should be carefully examined by managers before they implement it, only to find that great is not really so great.
Originality/value
The paper is original in its methodological design and is valuable to managers who are seeking advice for opportunities that enhance shareholder wealth.
This paper's origins lie in a perceived paradox whereby companies in Britain's financial services sector were externally promoted as ‘world class’ yet on a major peer survey of company reputations performed relatively weakly. The nature of this is explored across several components of reputation and reasons for the gap suggested. Recent events are seen as somewhat resolving the paradox; low reputation has apparently been justified by crises in the sectors; however, if that were the case, it raises questions about how any gap between reputation and reality came about and who was responsible for creating a false impression.
The research examines the stock price reaction to the announcement of the adoption of supply chain management-enhancing tools and technologies to determine whether there is a significant response from the capital markets. The results show that the adoption of supply chain management-enhancement tools appears to be value creating. The strength of the stock price reaction is positively related to the degree of certainty regarding the publication date of the publication.
We find that an investor can earn abnormal profits in the long-run using Forbes Platinum list of the 400 best big companies. Our trading strategy is based on results of an event study. When using the four-factor model of Carhart (1997), our results show that buying and holding the ten lowest ranked companies in a portfolio for 36 months post-publication would generate on average positive and statistically significant abnormal return of 22.74%. Consistent with the overreaction hypothesis of De Bondt and Thaler (1985), we find low ranked companies outperform high ranked companies in the long run.
This paper examines the question of whether corporate social responsibility (CSR) commitments by firms have the potential to be effective means of transmitting public law norms internationally. In the absence of a legal framework to impose sanctions for misrepresentation of CSR quality, questions about the potential for CSR to exert binding effects on firms naturally arise. CSR activity may still be effective as a vehicle for transnational norm diffusion. One possibility is that some normative commitments will be profitable, so self-enforcing. Another possibility is that the emergence of international rankings combined with market discipline through effects on firm's stock prices will provide a substitute for legal enforcement of CSR commitments. This study assesses these possibilities by examining the effect of the Corporate Social Responsibility rankings associated with Fortune Magazine in 2004, 2005 and 2006. The paper uses an event study methodology to determine whether corporate social responsibility is perceived by investors as enhancing firm value, whether negative performance is punished by investors and what factors across firms and industries contribute to the market response to Corporate Social Responsibility ranking.
Since 2000, "Business Ethics" magazine has published a list of the 100 Best Corporate Citizens. Our event study finds significant positive abnormal returns for new companies added to the annual listing on the press release date of the survey, both initially and in subsequent survey releases. Over longer holding periods, the top 100 companies consistently outperform the S&P 500, yet are not significantly different from a matched set of companies, with the exception of the initial survey year (2000). However, a rebalancing strategy based on new additions outperforms both the S&P 500 and a matched portfolio. Copyright (c) 2009, The Eastern Finance Association.
In this paper, we examine the returns to a portfolio of 12 publicly held firms that were featured in the July/August 1997 edition of Mother Jones as the “20 Better Places to Work” (the remaining eight are privately held). This survey was based on the firm's track record for charitable giving, fair labor practices, progressive benefits, sound environmental practices, and satisfied employees. While there is much evidence that the above qualities are very desirable for employees, little evidence exists indicating whether such a record results in increased shareholder wealth. In this study, we compare the annual returns, on a raw and risk-adjusted basis, for the selected firms to a broad market index, as well as a more appropriate benchmark (based on market capitalization and industry classification). We also determine whether there is an announcement effect associated with the public release of the list of Mother Jones firms.
This paper documents that strategies that buy stocks that have performed well in the past and sell stocks that hav e performed poorly in the past generate significant positive returns o ver three- to twelve-month holding periods. The authors find that the profitability of these strategies are not due to their systematic risk or to delay ed stock price reactions to common factors. However, part of the abnorm al returns generated in the first year after portfolio formation dissipates in the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented. Copyright 1993 by American Finance Association.
Two easily measured variables, size and book-to-market equity, combine to capture the cross-sectional variation in average stock returns associated with market "beta", size, leverage, book-to-market equity, and earnings-price ratios. Moreover, when the tests allow for variation in "beta" that is unrelated to size, t he relation between market "beta" and average return is flat, even when "beta" is the only explanatory variable. Copyright 1992 by American Finance Association.
Recent empirical research has identified a significant amount of volatility in stock prices that cannot easily be explained by changes in fundamentals; one interpretation is that asset prices respond not only to news but also to irrational "noise trading." We assess the welfare effects and incidence of such noice trading using an overlapping-generations model that gives investors short horizons. We find that the additional risk generated by noise trading can reduce the capital stock and consumption of the economy, and we show that part of that cost may be borne by rational investors. We conclude that the welfare costs of noise trading may be large if the magnitude of noise in aggregate stock prices is as large as suggested by some of the recent empirical literature on the excess volatility of the market.