Major
Finance
Advisor
Lin, Bing-Xuan
Advisor Department
Finance and Insurance
Date
5-2019
Keywords
Reputational Risk; Social Media; Reputation; Twitter Sentiment
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Abstract
In the era of social media, reputation is a crucial feature of business activity and can help companies attract customers and reach the economies of scale and scope that justify their investment. Reputational risk is a challenging topic. This is partly because it involves temporal perception and stock market frenzy like we saw with the first bubble, Tulipmania, and the Dotcom Bubble. These potential threats have strengthened due
to social media platforms playing a main role in these “panic-in, panic out” investing behaviors. As we see from many company crises, this reputational value can grow and then disappear in moments. Accordingly, it is difficult to quantify reputational risk and yet that is what makes it so intriguing. Social media has exacerbated the speed of information and misinformation. This is likely contributing to the increased volatility and the overstated short term movements in markets and individual stocks.”Today, more companies are bringing in outside resources to supplement their internal reputational risk research. Regulators, industry groups, consultants, and individual companies have developed elaborate guidelines over the years for assessing and managing risks in a wide range of areas, including commodity prices, control systems, supply chains, political instability, and natural disasters. These processes will help managers do a better job of assessing existing and potential threats to their companies’ reputations and deciding whether to accept a given risk or to take actions to avoid or mitigate it. In this project, I focus my research on analyzing the impact of social media and measuring the economic component of total reputational risk of four corporations: United Airlines, Tesla Motors, Chipotle Mexican Grill, and Facebook. I will be measuring the effects of adverse events on firm reputation by building an analysis of reputation tolerances by stakeholder.
The stakeholder groups included in this analysis are Media, Customers, Regulators, and Investors. It will include the impact on reputation on recent issues/reactions/ interpretations and actions required. My hope is that this project will shed some light on how reputation and branding risk are as important or even more important than any other company metric.