Reputation has a strong influence on individual investors' investment decisions
A special study by T-Media on publicly traded companies reveals that reputation has a significant impact on both retail investors’ interest in a company and their willingness to buy its shares. The study is based on an exceptionally extensive dataset, which includes a total of nearly 16,000 company valuations of large and medium-sized companies listed on the Helsinki Stock Exchange.
In collaboration with the Finnish Shareholders’ Association and the Finnish Foundation for Share Promotion, T-Media surveyed the reputation of the 78 largest listed companies in May–June 2021. A total of 7,251 individual investors responded to the survey.
A key finding of the study is the exceptionally strong impact of reputation on retail investors’ willingness to invest and recommend a company. A change in reputation results in a nearly 1.5-fold change in investors’ willingness to invest in the company and recommend it as an investment opportunity.
“Although Reputation&Trust includes assessments of, among other things, corporate governance, financial performance, and ESG factors, the finding of such a strong link between a publicly traded company’s reputation and retail investors’ willingness to invest came as a surprise even to us. We know from our other studies that there is a strong link between reputation and people’s behavioral intentions, but the strength now confirmed is exceptional,” says Hanna-Mari Aula, Senior Analyst at T-Media.
“The findings of this study send a strong message to companies. Reputation is of enormous importance to publicly traded companies as a reliable and attractive investment. The study’s findings support previous international research. According to those studies, reputation factors account for up to one-third of a company’s value,” says Victor Snellman, CEO of Osakesäästäjät.
“By improving its reputation, a company can encourage positive behavior from individual investors—strengthening trust, the desire to buy products, the willingness to recommend them, the desire to invest, the willingness to defend the company in a crisis, or to seek employment there. You could say that investing in reputation pays for itself many times over,” Snellman continues.
The most prestigious publicly traded companies are Revenio Group, Ponsse, and Kone
Based on the collected data, a reputation score on a scale of 1 to 5 is calculated for each company surveyed. The listed companies with the best reputations are Revenio Group (4.26), Ponsse (4.20), and Kone (4.15).
Among the largest large-cap companies with revenue exceeding one billion euros, the top five—in addition to Kone—include Neste, Valmet, Sampo, and UPM-Kymmene. Among mid-cap companies with revenue between 150 million and one billion euros, the top three are Revenio Group, Ponsse, and QT Group.
“Listed companies in Finland generally have a good reputation, which indicates that they have already worked to build their reputation and that private investors consider them to be in quite good shape. Of the 78 companies surveyed, as many as 55 have a reputation that is at least good. Only one company’s reputation rating is at a low level,” says Aula.
When examining the overall structure of listed companies’ reputations, it becomes apparent that financial performance, management, and products and services are considered the most important factors contributing to reputation. In contrast, retail investors’ perceptions of companies’ engagement with them score lower than the overall average.
The importance of retail investors has grown
The role of individual investors in financing corporate growth has grown in recent years. More than 920,000 Finnish individuals already own publicly traded shares.
“Research findings show that long-term reputation-building among private individuals really pays off. If a company has a good reputation among investors, it becomes easier for it to secure financing,” emphasizes Sari Lounasmeri, CEO of the Finnish Foundation for Share Promotion.
“Retail investors have been exceptionally active in this year’s initial public offerings. New investors and younger investors than before have entered the market. Many long-term shareholders have also become more active in participating in IPOs. It is wise for a company to prepare for its financing needs in advance. For this reason, reputation management must be a continuous effort, not just when the company wants something from investors,” Lounasmeri continues.
This is how we conducted the study
Reputation&Trust Listed Companies survey examined the reputation of 78 companies among Finnish retail investors. The companies were selected in accordance with Nasdaq’s market capitalization classification, which took effect in January 2021.
The companies’ reputations were measured using Reputation&Trust survey model, which evaluates reputation based on eight factors: governance, finance, leadership, innovation, engagement, products & services, workplace, and sustainability.
The survey targeted Finnish retail investors aged 15 and older nationwide. Data for the survey was collected via an online questionnaire between May 4 and June 15, 2021, in collaboration with the Finnish Foundation for Share Promotion and the Finnish Shareholders’ Association.
A total of 7,251 Finns responded to the survey, providing a total of 15,998 business reviews.
The margin of error for the entire dataset is at most approximately 1.15 percentage points in either direction.
For more information:
Hanna-Mari Aula, Senior Specialist
hanna-mari.aula@reptrust-staging.fi-p.seravo.com, Tel. 040 585 6466
Osakesäästäjät is a nationwide community of investors dedicated to helping Finns build their wealth. The community provides investors with unbiased information, educational resources, and valuable member benefits. Osakesäästäjät has nearly 35,000 members.
The Stock Exchange Foundation promotes securities investment and the securities markets. The Foundation’s operations are funded by rental income from the Stock Exchange Building, which is owned by the Foundation.
