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Leveraging corporate reputation

Thursday 18, Jul 2019

AMO, the leading international strategic advisory network which includes Financial & Corporate Relations (FCR) as its Australian associate, has released research that for the first time unveils the individual components of corporate reputation that create the most value for the world’s leading companies.

Its key findings include:

  • The world’s top 15 market indices owe more than a third of their valuation to corporate reputations, amounting to US$16.77 trillion of value for shareholders for the 12 months to March 31, 2019.
  • More than one in five companies in the world’s top stock market indices suffered market cap erosion due to poor corporate reputations.
  • Technology, telecoms and healthcare enjoyed the greatest value boost from their strong corporate reputations.

Until now, it has been hard to examine or measure the value of corporate reputations in any comprehensive way. AMO’s report shows that 35.3% of the overall market capitalisation of over 1,000 of the world’s largest companies is attributable to corporate reputations.

Almost eight in 10 companies surveyed saw their stock value shored up by a positive corporate reputation, boosting their combined market capitalisation by $17.2 trillion.

At the other end however, 21% of companies saw their market cap reduced by a total $436 billion due to the impact of negative reputations. From this latest research, it is clear that corporate reputation can be a major contributor to shareholder value, but only when it is performing well. 

The report found that the four most important factors driving reputation contribution to stock prices around the world were: 

  • investor perceptions of a company’s long-term investment value (accounting for 13% of reputational value)
  • quality of management (12.5%)
  • financial soundness (12.2%) and; 
  • ability to manage people (11.7%). 

The research indicates that companies will achieve disproportionately greater returns on their reputation investment by ensuring that their communications activity is aligned to promote messages that matter most to investors at the time. 

In a world of growing complexity and rapid-fire stock market volatility, investors are increasingly sensitive to company reputations. When times get tough, it will be the companies with stronger, more balanced corporate reputations that will ride the ensuing storm more effectively, protect value and come out on top. 


Please contact FCR at mail@fcr.com.au to obtain a copy of the AMO report.