Business Image and Investor Impact
How do you Interpret a Company’s Business Image?
Most day traders are at least somewhat familiar with the companies whose stocks they trade in. Typical considerations when considering investing in a particular company’s stock include:
- Recent financial results
- Historical trend of company stock value
- Market influences that indicate looming changes in value
- Political activity that may impact the company’s future sales potential (new or cancelled contracts, limitations announced by regulatory jurisdictions, etc)
- Price/performance expectations
There are numerous other factors that day traders and long-term investors will take into consideration. What about a company’s business image? Does that impact investor actions as well?
To find out just how investors’ buy and sell decisions reacted to corporate image influences studies have been undertaken to review image as a factor. What the studies revealed is that decisions are very definitely influenced in a big way by perception of a company’s overall image presented to the public. In fact, their findings determined that even if there were positive financial influences for a particular stock or company, negative image factors would result in a decision not to buy the asset or at least generate second thoughts about proceeding with the acquisition.
A negative perception consistently raised doubts for investors that resulted in further analysis of potential financial gains whereas a positive image of the company made the decision more automatic for proceeding with the purchase.
Where the studies included stocks of relatively equal financial standings corporate image provided the determining factor in decisions to buy. It’s important to note that this particular group of studies omitted severe instances of image damage due to such factors as major scandals.
Positive image traits for consideration may include company attributes such as:
- Reputation for quality products or services
- Leader in their market segment
- Geared toward a large or financially secure demographic
- Heavy investment in research and development for new products
- Known for contributions to charitable causes and sponsorship of local events
Negative images can be generated in several ways as well:
- Questionable or shoddy quality of products
- Product price not commensurate with quality
- Lacks responsiveness to customer service
- Behind in technology, with no strategy to improve
- More interested in profits that participating in community activities
It would appear obvious that when considering investment opportunities you would select from the positive image companies over less attractive business investments, all else being equal.
Business Image and Day Traders
Day traders make quick decisions on buying and selling stocks or other financial instruments. This makes such factors as corporate image pros and cons potentially of more importance to day traders than for buy-and-hold investors who may assume that incidents that can create a negative image will be temporary, and any stock loss will be recouped in time. Access to public knowledge of a declining corporate image or image boost can offer opportunities for day traders to avoid losses or to enjoy profits.
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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.