Purpose This study investigates whether meeting or beating earnings benchmarks influences corporate reputation among the industry experts whose evaluations determine Fortune's Most Admired Companies and Contender Companies lists. Design/methodology/approach We employ regression models to examine the association between firms' performance on earnings benchmarks and the reputation scores assigned by the Fortune survey evaluators. We also test whether benchmark performance among firms listed as Fortune's Most Admired Companies and Contender Companies is associated with subsequent operating outcomes and whether the reputational effect of benchmark performance is driven by firms that narrowly meet or barely beat analyst forecast benchmarks. Finally, we examine cross-sectional variation in the benchmark effect related to information asymmetry, business complexity, and market concentration. Findings Meeting or beating analyst forecast benchmarks is positively associated with higher reputation scores and ranks, whereas profitability and earnings growth relative to the prior year show no significant association. Among firms listed as Most Admired or Contender companies, performance relative to analyst forecast benchmarks is positively associated with subsequent operating performance, indicating that benchmark performance captures information about firms' long-term prospects. The benchmark effect does not significantly differ between firms that narrowly meet or beat expectations and those that exceed expectations by a larger margin, suggesting that the effect is unlikely to be driven solely by expectations management. The benchmark effect is stronger for firms with greater information asymmetry, lower business complexity, and higher market concentration. Originality/value This study provides novel evidence that Fortune's survey evaluators place particular weight on analyst forecast benchmarks when forming corporate reputation assessments.
Wang et al. (Mon,) studied this question.