Investor relations, reputational bonding, and corporate governance: The case of Royal Ahold

Abe de Jong, Douglas V. DeJong, Gerard Mertens, Peter Roosenboom

Research output: Contribution to journalArticleResearchpeer-review

19 Citations (Scopus)

Abstract

Royal Ahold (Koninklijke Ahold NV) was one of the major success stories in the 1990s and is one of the major failures, suffering a complete meltdown, in 2003. We investigate the strategy, investor relations, accounting transparency and corporate governance of Ahold; these elements jointly drive the firm's performance over the past decade. Investor relations and its implications are an important but under researched aspect of the market's belief formation process. For Ahold, investor relations is an important component of reputational bonding [Siegel, J., 2005. Can foreign firms bond themselves effectively by renting US securities laws? Journal of Financial Economics 75, 319-359]. Our clinical study documents investor relations' influence on investor expectations. We then provide an in-depth analysis of the strategy, accounting transparency and corporate governance that lead to Ahold's downfall. We provide insights and implications into these relationships that present theory and empirical studies have not fully addressed.

Original languageEnglish
Pages (from-to)328-375
Number of pages48
JournalJournal of Accounting and Public Policy
Volume26
Issue number3
DOIs
Publication statusPublished - 1 May 2007
Externally publishedYes

Keywords

  • Corporate governance
  • Financial economics
  • Financial reporting
  • International economics
  • Investor relations
  • Law and economics
  • Regulation

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