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The Impact of Reputation on Corporate Financial Performance: Median Regression Approach

Author

Listed:
  • Vig Silvija

    (Polytechnic of Međimurje, Čakovec, Croatia)

  • Dumičić Ksenija

    (Faculty of Economics & Business, Zagreb, Croatia)

  • Klopotan Igor

    (University North, Varaždin, Croatia)

Abstract

Background: In recent years, reputation has become an important risk concern for companies around the world. Deloitte Global Survey highlights the reputation risk as the top strategic business risk in 2014. This is also proven by a research conducted by AON Global Risk Management Survey in 2015 and Allianz Risk Barometer Survey in 2016 which finds a loss of reputation as one of the biggest risks for business executives. Furthermore, the importance of reputation is confirmed by the fact that reputation accounts for more than 25 percent of a company’s market value and the total market capitalization of the S&P500 companies.Objectives: To investigates the relationship between corporate reputation and financial performance.Methods/Approach: The survey of the paper was conducted in 2015 in Croatia. The questionnaire for assessing corporate reputation contained three reputational dimensions: products and services, corporate integrity, and organizational performance while the financial dimensions contained indicators of EVA, ROCE, ROA, ROE and the financial stability coefficient. Hierarchical regression methods were applied in the analysis.Results: This research leads to the conclusion that some dimensions of corporate reputation can be important predictors of financial performance.Conclusions: Results of the research could be a valid motivation for business executives to consider reputation risk as a critical issue of corporate business strategy.

Suggested Citation

  • Vig Silvija & Dumičić Ksenija & Klopotan Igor, 2017. "The Impact of Reputation on Corporate Financial Performance: Median Regression Approach," Business Systems Research, Sciendo, vol. 8(2), pages 40-58, September.
    • Handle: RePEc:bit:bsrysr:v:8:y:2017:i:2:p:40-58:n:4
    DOI: 10.1515/bsrj-2017-0015
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    References listed on IDEAS

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    1. Silvija Vig & Ksenija Dumicic, 2016. "Impact of commitment to business ethics to nonfinancial business performance," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 14(2), pages 165-181.
    2. Manfred Schwaiger, 2004. "Components And Parameters Of Corporate Reputation – An Empirical Study," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 56(1), pages 46-71, January.
    3. Treviño, Linda Klebe & Butterfield, Kenneth D. & McCabe, Donald L., 1998. "The Ethical Context in Organizations: Influences on Employee Attitudes and Behaviors," Business Ethics Quarterly, Cambridge University Press, vol. 8(3), pages 447-476, July.
    4. Michael Bendixen & Russell Abratt, 2007. "Corporate Identity, Ethics and Reputation in Supplier–Buyer Relationships," Journal of Business Ethics, Springer, vol. 76(1), pages 69-82, November.
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    Cited by:

    1. Xiaoqian Zhu & Yinghui Wang & Jianping Li, 2022. "What drives reputational risk? Evidence from textual risk disclosures in financial statements," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-15, December.

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    More about this item

    Keywords

    business ethics; corporate reputation; financial performance; hierarchical regression; reputation risk;
    All these keywords.

    JEL classification:

    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics

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