Country Reputation and Corporate Activity

We study the link between a previously neglected form of intangible firm asset—country reputation—and corporate sales. By exploiting variation in nationalities of foreign victims in local terror attacks, we detect unanticipated distortions in reputations of local countries in foreign countries and we pin down reductions in sales of local country firms in foreign markets. The reductions in sales are economically and statistically significant, persistent, and more pronounced after attacks with high levels of foreign media coverage. Local country firms, whose names resemble names from their countries of origin, experience greater deteriorations in their sales. The distortions in country reputations are associated with depreciations in overall firm value, sales growth, and profitability. This paper was accepted by Gustavo Manso, finance. Funding: M. I. Canayaz thanks Oxford University Centre for Corporate Reputation for financial support. This work was supported by the Singapore Ministry of Education [Academic Research FundTier 1, RG170/18]. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4753 .