Gentry hits Harvard Business Review

Our own Dr. Gentry has hit it big in the Harvard Business Review. Check out his research here.  Also published in the Academy of Management Journal (a top 5 business research outlet), their paper suggests that equity investors pay attention to both the CEO’s reputation and also to the reputation of equity analysts when making investment decisions.  Other research has suggested that both the CEO’s reputation and an equity analyst’s reputation can change investment decision, but no one has examined how investors choose between the two when they conflict. Gentry and his colleagues, Scott Graffin (Georgia) and Steve Boivie (Texas A&M), found that equity analysts “win” in the battle of the reputations. If a high reputation CEO is downgraded by a high-reputation analyst, investors respond to the analyst. However, if a high-reputation CEO is downgraded by an analyst who is not well known, the CEO’s reputation cushions the impact to the firm’s valuation, sometimes by over $100 million. They make some suggestions about how people chose between different reputations when making decisions that involve conflicting signals (like deciding whether to buy a great car from a terrible car dealer), but for equity investors deciding whom to listen to, there can be only one.