Understanding the Direction, Magnitude, and Joint Effects of Reputation When Multiple Actors’ Reputations Collide

Abstract

Despite extensive research efforts into the effects of reputation, virtually all of it has examined the effect of one type of reputation on one or more specific outcomes. But, how, for example, might the reputations of analysts, CEOs, and firms individually and jointly affect firm outcomes? To answer this question, the present study focuses on a context in which reputations are particularly relevant: changes in analyst recommendations and the effect of those changes on stock market reactions. Our study contributes to the increasing reputation literature by being one of the first to recognize and measure how the market accounts for multiple reputations. Further, we argue and find that the reputations of different actors interact with each other when determining particular firm outcomes. We also find that different actor’s reputations influence the reactions of observers.