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Being famous matters: Evidence from cash flow volatility

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  • Ahmed, Mohamed Shaker
  • Elnahass, Marwa

Abstract

Corporate reputation is a paramount driver of value creation and competitive advantage in the 21st century. Motivated by the importance of cash flows and the under-researched nature of their volatility in the corporate finance literature, we investigate the impact of corporate reputation on cash flow volatility. We developed unique hand-collected data from the Fortune world's most admired companies for a sample of U.S. companies from 2014 through 2020. The findings show that there is a negative relationship between corporate reputation and cash flow volatility. Our additional analyses demonstrate that the negative relationship between corporation reputation and cash flow volatility is stronger for firms with a higher company beta, higher earnings, and lower short-term liquidity. Our findings imply that improving corporate reputation can decrease the risk levels associated with operating performance.

Suggested Citation

  • Ahmed, Mohamed Shaker & Elnahass, Marwa, 2024. "Being famous matters: Evidence from cash flow volatility," International Review of Financial Analysis, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924000978
    DOI: 10.1016/j.irfa.2024.103165
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    More about this item

    Keywords

    Corporate reputation; Cash flow volatility; Operating performance; Fortune's corporate reputation score;
    All these keywords.

    JEL classification:

    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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