However, the reverse is also true. A company’s share price can fall dramatically if a company suffers a bout of negative publicity and loses it once good reputation.  There are two recent examples which highlight this issue.

It is fair to say that BP is in trouble. The oil spill in the Gulf of Mexico which began as a serious accident has become a catastrophe on many levels and one which BP might struggle to recover from.

BP’s embattled Chief Executive Tony Hayward was described by the New York Daily News as “the most hated – and most clueless – man in America”. The Washington Post wrote: “At this point, how can anyone believe a word this man says? If he told me my mother loves me, I’d want a second source”. It will take time to recover from publicity such as this.

BP’s share price at the beginning of April, before the crisis hit, was at around 620p. Today, the price stands at around 330p – around half of BP’s total value has been wiped off the company in a matter of months.

Now, it is difficult to say how much, or to what extent, PR affects the share price of a company because there are other factors involved in determining this value other than news and publicity.

These factors might include everyday market changes in the FTSE 100 – any change in BP might just be related to the wider market movements.

Also, any movement in share price could just be related to that specific sector being in decline.

However, when these factors are examined we can see they do not explain the entire reason for BP’s share price fall. While the FTSE 100 has lost about 10 percent and Shell has lost around 5 percent of total value from April to June 2010, BP has lost around 45 percent of its value.

While evidence is not conclusive is does strongly suggest that it is vital to protect your reputation during a crisis in order to minimise the negative impact on your share price.

And BP is not the only company to have suffered a drop in share price as a result of the negative publicity. On April 16 the Securities and Exchange Commission filed a civil fraud complaint against Goldman Sachs and one of its employees and graph three below shows the almost instant drop in share price as a result. Despite months passing, Goldman’s share price has failed to recover.

The premier Wall Street bank has now hired PR consultants and, it has been reported, solicited ideas for a long-term brand-building campaign from several advertising agencies in an effort to address its continuing public relations and legal crisis.

Lloyd Blankfein, Goldman’s Chief Executive, said the bank was trying to dig itself out of a “hole” that was partly of its own making. This was because, he claimed, the investment bank did not have a strong enough relationship with the American public.

To resolve this issue the bank announced only last week that it has hired David Wells, former Head of  JP Morgan Chase’s press office for Europe, the Middle East and Africa, as a Managing Director responsible for rebuilding the bank’s reputation in the Americas. Goldman Sachs, it seems, will attempt a reputation led recovery.

In 1999 Alan Greenspan, the former head of the US Federal Reserve, delivered a speech at Harvard University entitled “Transcending all else is being principled”. In it he said of reputation “In today’s world, where ideas are increasingly displacing the physical in the production of economic value, competition for reputation becomes a significant driving force, propelling our economy forward. Manufactured goods often can be evaluated before the completion of a transaction. Service providers, on the other hand, usually can offer only their reputations.” Regardless of how Greenspan might be seen today, his words ring true given the current reputations of these two corporate behemoths with reputations to match.

It does take time to build a good reputation and it certainly does take longer to rebuild ones that have shattered but, right now, I am sure BP’s besieged Chief Executive Tony Hayward would be happy to pay the company’s last 100 million dollars to regain his firm’s reputation. And, if he isn’t, he should be.