Superior corporate reputations can have strategic value for firms. Of the "multiple reputations" associated with each firm, we focus on the perceptions of the general public. The public represents the most widely defined stakeholder group but has attracted the least amount of research interest to date. Drawing on data for German firms, this study demonstrates that superior reputation perceptions issued by the general public increase shareholder value, as measured by future stock returns. This study provides a more nuanced understanding for this novel finding. Applying a conceptualization of reputation that balances both its affective and cognitive components, we find that reputation perceptions that are driven by nonfinancial aspects are more value relevant in the future than reputation perceptions that are driven by previous financial performance. Copyright R RF ) are used as the dependent variables, and the risk factors are regarded as the independent variables. b Estimator: OLS with heteroskedasticity and autocorrelation consistent standard errors (Newey and West, 1987). c The Capital Asset Pricing Model (CAPM) with only a market factor, the 3-Factor Fama-French (3FF) model (with market, size, and value risk factors), and the 4-Factor Fama-French (4FF) model (with market, size, value, and momentum risk factors). d The 4-Factor Fama-French model augmented with the returns of the AP-portfolio, controlling for co-occurring financial performance effects.
This study investigates the distinct and joint effects of corporate social performance (CSP), firm size, and visibility on a company’s decision to disclose sustainability-related information through sustainability reports. It seeks to provide more nuanced explanations for why certain companies tend to extensively report on their sustainability performance. First, while prior studies have predominantly focused on environmental reporting, the current analysis considers comprehensive sustainability reports that include both environmental and social issues. Second, the article argues that the effects of two important antecedents of legitimacy pressure—firm size and organizational visibility—should be analyzed separately rather than restricting the analysis on the effects of legitimacy pressure per se. Third, it argues that the hypothesized effects are nonlinear because the marginal costs and benefits of sustainability reporting vary with a company’s CSP level, its size, and its visibility in the public. Finally, although there is a strong link between CSP and sustainability reporting, the strength of this link depends on its size and visibility. The study of 280 companies in environmentally and socially sensitive industries provides considerable support for these hypotheses, including evidence that size and visibility independently affect sustainability reporting and that the shape of the CSP/sustainability reporting link is contingent upon firm size and visibility.
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