The Certification Role of Company Awards for Private Firms

Abstract

This paper examines the impact of company awards for fast-growing private firms on firms’ future growth and performance. We expect that firms use such awards as a certification of quality, helping them to attract new employees, financing and/or customers. To test this conjecture, we use information from Inc. magazine’s annual award rankings and combine this data with historical copies of firms’ webpages and job postings. We find that firms are more likely to disclose and advertise their award when they are placed just within a more salient award category (Inc. 500 versus Inc. 5000 award) or receive special acknowledgments (top industry awards). After verifying this disclosure channel, we then show that these firms are also hiring more employees subsequent to receiving the award, consistent with a positive growth effect. Taken together, this paper shows that company awards might be an important facilitator for private companies that otherwise have an opaque information environment.