The Impact of Corporate Reputation on Market Value, Emprical Evidence From Turkey

Abstract

The high profitability expectation of the past is replaced with the advantage of sustainable competition in today's business world. The boundaries of companies and their effects on society have expanded dramatically because of globalization and developments in information technologies, which has in turn raised society's expectations of companies. For this reason, investors expect the companies to be sensitive to social issues besides having a high financial performance. The issue of corporate reputation has been discussed by many different disciplines through the years. Most of these studies consider corporate reputation as a strategic asset, and claim that it leads to sustainable competition by increasing financial performance. On the other hand, financial performance recognizes as a part of corporate reputation in some other studies. As a result, the concept of corporate reputation has now become essential for business. This study aims to examine whether the corporate reputation has significant effect on market value of companies. In literature, there are many studies about corporate reputation and financial performance relations. Many studies have demonstrated that there is a positive relationship between corporate reputation and financial performance. This has raised the problematic question of how reputation should be measured. Especially in developed countries, reputation indices are common indicators of reputation. But in Turkey, there are limited studies because of inadequacy of long-term database and measurement scales. In this study, corporate reputation is considered as an intangible asset, shaped by the perceptions of all internal and external stakeholders of corporations which can affect corporate value. To measure corporate reputation, a scale which is composed of 58 different criteria and formed by previous scales has been used. The full sample includes 99 listed companies and 1,188 firm years for 2006-2017. Panel data regression analysis has been used to test the relationship between corporate reputation and market value. The results are consistent with the past studies that highly reputable firms have high market value.