Corporate Disclosure Quality and Corporate Reputation

Abstract

The paper investigates the link between a firm's overall disclosure quality and its corpoate reputation. The results show that the measure of corporate reputation is positively related to the disclosure measure, after controlling for market and accounting signals indicating the size of assets, market assessment of the value of the assets in place and rate of return on assets.

The Effect of Environmental, Social, and Governance (ESG) Performance and Disclosure on Cost of Debt: The Mediating Effect of Corporate Reputation

“…[Insert Table 5 here] Regarding the control variables, the results presented in Table 5 show that reputation is positively and significantly correlated with firm size (r = 0.206, p<0.01 (Rho = 0.206, p<0.01)) and financial performance (r = 0.267, p<0.01 (Rho = 0.250, p<0.01)), which is in line with prior studies (e.g., Landgraf and Riahi-Belkaoui, 2003;Brammer and Millington, 2005;Miller and Triana, 2009;Brammer et al, 2009). The results also show that reputation is negatively and significantly correlated with leverage (Rho = -0.159, p<0.01) and volatility (r = -0.153, p<0.01 (Rho = -0.101, p<0.01)), which is also in accordance with prior studies (e.g., Brammer and Millington, 2005;Brammer et al, 2009).…”

“…According to the signalling theory, the reputation of a firm acts as an important signal of the firm's organizational effectiveness (Landgraf and Riahi-Belkaoui, 2003;Riahi-Belkaoui, 2004;Hsu, 2012). In this sense, a good reputation should enhance stakeholders' support and loyalty, which helps in doing business and therefore brings economic benefits and competitive advantage to the firm (Riahi-Belkaoui, 2004;Armitage and Marston, 2008;Gottschalk, 2011;Pfister et al, 2019).…”

“…In this sense, a good reputation should enhance stakeholders' support and loyalty, which helps in doing business and therefore brings economic benefits and competitive advantage to the firm (Riahi-Belkaoui, 2004;Armitage and Marston, 2008;Gottschalk, 2011;Pfister et al, 2019). These advantages may include : (1) customer preference in doing business with the company when other companies' goods and services are available at a similar price and quality (Gottschalk, 2011); (2) the opportunity of charging premium prices for its products to consumers (Landgraf and Riahi-Belkaoui;Riahi-Belkaoui, 2004); (3) the capability to pay suppliers lower prices for purchases (Fombrun and Shanley 1990); (4) the creation of a better image in the capital markets and to investors through a more correct valuation (Landgraf and Riahi-Belkaoui;Riahi-Belkaoui, 2004) and ( 5) the generation of more loyalty and productivity from employees (Fombrun and Shanley 1990).…”

“…In this setting, ESG information is valuable because it helps a company demonstrate that it is managing its risks and has a track record of paying attention to its ESG issues (Koehler and Hespenheide, 2013;Axajonow et al, 2018). Indeed, it can be argued that firms that constantly manage and make timely and informative disclosures are more likely to avoid withholding value-relevant unfavourable information (Landgraf and Riahi-Belkaoui, 2003). Being recognized as a well-managed and high-quality reporting firm can enhance the organization's reputation and foster greater trust with its stakeholders (IFAC, 2012).…”

“…-Performanceit measured as net income scaled by total assets of firm i at the end of year t (Black and Carnes, 2000;Landgraf and Riahi-Belkaoui, 2003;Brammer et al, 2009;Brammer and Millington, 2005;Zhu, 2014).…”