Corporate Reputation and Financial Performance: The Interaction between Capability and Character

Extant research sees reputation as a significant corporate asset, but examinations of the downstream performance impacts of strong reputations have exhibited significant theoretical and empirical limitations and have consequently provided mixed evidence. Conceptualisations of the mechanisms by which firms’ reputations affect financial performance are underdeveloped, and empirical work suffers from the use of highly aggregated, biased, and ambiguous measures of reputation, and arbitrarily selected single indicators of financial performance. Using a unique database, we unpack the impacts of distinct dimensions of reputation on financial performance, and examine the influence of these individually, and in conjunction with each other, on a range of measures of financial performance. Our results show that distinct aspects of reputation influence financial performance differently, that reputations are more relevant for some aspects of financial performance than others, and that strong complementarities exist between dimensions of reputation in respect of their influence on downstream financial performance. In so doing, we significantly extend the literature on reputation and financial performance in both theoretical and empirical terms.