Corporate Reputation and Bankruptcy Risk
Journal Title: BAR: Brazilian Administration Review - Year 2020, Vol 17, Issue 2
Abstract
In view of the influence of corporate reputation on investors’ choices and risk concerns, the purpose of this study was to explore the relationship between corporate reputation and bankruptcy risk in public firms. The investigation is a contribution to the burgeoning literature on corporate reputation associated with accounting, despite reputation being classified as an intangible asset capable of generating competitive advantage. Our sample included 4,578 observations (441 firms) covering the period 2005-2016. The overall score on the World’s Most Admired Companies ranking was used as a proxy for reputation. Bankruptcy risk was quantified by Altman Z-scores (Zang, 2012) and accounting information for each year in the period was retrieved from the database Compustat Global. Our results reveal that corporate reputation has a negative influence on bankruptcy risk, reiterating the importance of risk management. When firms attract and strive to secure the favor of stakeholders, they increase risk for the same reason. However, this effect is counterbalanced by good reputation. Thus, corporate reputation is a valuable strategic resource with which managers can boost confidence among investors, increase the firm’s credit worthiness and perpetuate the organization on the market. Furthermore, these results expand the literature on corporate reputation and risk of bankruptcy, and show signs that companies with high reputation have lower risk of bankruptcy and tend to honor their debts.
Authors and Affiliations
Alan Diógenes Góis (in memoriam), Márcia Martins Mendes De Luca, Gerlando Augusto Sampaio Franco de Lima, Jislene Trindade Medeiros
Keywords
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- EP ID EP686653
- DOI http://dx.doi.org/10.1590/1807-7692bar2020180159
- Views 207
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