THE IMPACT OF PRIOR FIRM FINANCIAL PERFORMANCE ON SUBSEQUENT CORPORATE REPUTATION

This study links corporate reputation, as measured by Fortune magazine 's Most Admired list, with firm financial performance. Seven measures of financial risk and return were collected for a sample of 149 firms from two time periods, 1981 and 1986. The mean score of four attribute s from the 1993 Fortune Most Admired list for the sample was then anal yzed with the financial data through regression analysis. Two financia l variables, Standard Deviation of the Market Return of the Firm and R eturn on Sales, explained between 0.12 and 0.14 of subsequent reputati on. The implication for management is that they can affect a firm's su bsequent reputation by lowering financial risk and controlling costs.