Perceptions of Firm Quality: A Cause or Result of Firm Performance

Abstract

This article examines two issues regarding the formation and effects of qualitative perceptions offirm performance: First, do firm quantitative measures of performance influence perceptions offirm management quality? Second, do perceived firm qualities affect measures of firm financial performance? We examined data from Fortune magazine's survey of corporate reputations as a source for measures of perceivedfirm quality. The results suggest thatfinancial measures of both risk and return influenced perceptions offirm quality. Moreover, perceptions offirm quality, though correlated with the subsequent performance of specific financial performance measures, were generally more closely related to priorfinancial performance than to subsequent financial performance.