High-reputation firms are recognized for consistently meeting and even exceeding stakeholders’ expectations. Prior research suggests that compared to other firms, this elite subset of firms attract more and better job applicants, command higher prices for products and services, and sustain higher financial performance. However, recent research has also found that high-reputation firms face greater pressure to achieve rapid growth.
Prestigious Firms Make Riskier Acquisitions Than Other Firms
And investors aren’t always enthusiastic about it.
April 24, 2017
Summary.
Do greater growth pressures on high-reputation firms, as well as their desire to maintain their reputations, influence their acquisition behaviors? New research finds that high-reputation firms make approximately twice as many acquisitions in an average year than other comparable firms. The study also revealed that, relative to their current portfolio of businesses, high-reputation firms made more unrelated acquisitions than other firms. Perhaps surprisingly, investors responded more negatively to the acquisition announcements of high-reputation firms than to other firms.