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Are the best of the best better than the rest? The effect of multiple rankings on company value

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Abstract

In this paper, we explore the cumulative and interactive effects from being listed on one or more of four popular annual surveys (Fortune’s “Most Admired Companies” and “100 Best Companies to Work For,” Business Ethics “Best Corporate Citizens,” and Working Mother’s “100 Best Companies for Working Mothers.”) We find portfolios constructed of firms selected across these surveys add value to a portfolio, initially and over longer-holding periods, but the overall results are driven by the performance of those firms selected from the Most Admired Companies and Best Corporate Citizens rankings. We also discover that being listed in two or three different surveys on a yearly basis produces incremental value.

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Notes

  1. In years prior to 2003, Business Ethics used the 500 companies in the S&P 500 along with 150 companies from the Domini Index. Since 2007, the list has been compiled by Corporate Responsibility Magazine.

  2. In the first year of the survey, Business Ethics calculated the overall score based on four stakeholders: shareholders, community, employees, and customers.

  3. Additional information on the methodology, the composite scores, and their components can be found at http://www.business-ethics.com/1999-100b.htm.

  4. Prior to 2003, Business Ethics used a three-year average instead of the one-year average currently being used.

  5. We use 2000 as the starting point of our sample period as it represents the first year in which all four surveys are conducted.

  6. We use trading days (−301, −46) to estimate the market model parameters. Thus, the estimation length for this market model is a 255 day trading year.

  7. For a certain year, a company could be listed in more than two surveys. This situation will be examined in the later sections.

  8. Due to the close proximity of announcement dates occurring within a given year across the four surveys, we consider a variety of parameter estimation periods. Such variation will allow us to assess whether our results are robust given biases that may exist when parameter estimates for one event window for a given survey are included in the event window of another survey release. No material differences exist in results and are available upon request.

  9. The 2,000 new subsample for BCC includes all firms in that survey, as it was the first BCC list. We redo our analysis using data across the four samples for 2001–2008. This variation removes the potential bias introduced from the inclusion of an initial year list for BCC as opposed to a sample exclusively composed on companies not previously listed in a previous version of the list. The results are not materially different and are available upon request.

  10. We report only cumulative abnormal returns (CARs) surrounding the event dates for brevity. Results on the abnormal returns (ARs) surrounding the event dates are available upon request.

  11. The difference is statistically significant for the overall sample and the sample for BCC.

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Authors and Affiliations

  1. Black Family Professor of Insurance and Risk Management, Sam and Irene Black School of Business, Penn State Erie, Erie, PA, 16563, USA

    Greg Filbeck

  2. Farmer School of Business, Miami University, Oxford, OH, 45056, USA

    Raymond Gorman

  3. Sam and Irene Black School of Business, Penn State Erie, Erie, PA, 16563, USA

    Xin Zhao

Authors
  1. Greg Filbeck
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  2. Raymond Gorman
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  3. Xin Zhao
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Correspondence to Greg Filbeck.

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Filbeck, G., Gorman, R. & Zhao, X. Are the best of the best better than the rest? The effect of multiple rankings on company value. Rev Quant Finan Acc 41, 695–722 (2013). https://doi.org/10.1007/s11156-012-0329-5

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