The value‐relevance of corporate reputation during the financial crisis
| Date | 21 September 2010 |
| DOI | https://doi.org/10.1108/10610421011085703 |
| Published date | 21 September 2010 |
| Pages | 389-400 |
| Author | Sascha Raithel,Petra Wilczynski,Matthias P. Schloderer,Manfred Schwaiger |
| Subject Matter | Marketing |
The value-relevance of corporate reputation
during the financial crisis
Sascha Raithel, Petra Wilczynski, Matthias P. Schloderer and Manfred Schwaiger
Ludwig-Maximilians-Universita
¨tMu
¨nchen, Munich, Germany
Abstract
Purpose – The purpose of this paper is to examine the value-relevance of corporate reputation during times of crisis. The paper seeks to extend the
view beyond the traditional focus on the cognitive component of reputation, shed light on its affective component, and integrate the perceptions of
different stakeholder groups.
Design/methodology/approach – The paper uses two large-scale surveys, one from before and one from after the financial crisis year of 2008, to
ascertain the reputation evaluations of the largest publicly listed corporations in Germany. The paper employs a model augmented with standard
accounting variables (i.e. sales, return on assets, etc.) to analyse the link between corporate reputation as noted by different stakeholder groups and
future firm value.
Findings – Even though corporations are not able to elude the overall negative impact of an economic crisis, the magnitude of influence depends on
the individual firm dynamics as related to the firm’s reputation. In particular, firm value dynamics are significantly associated with a reputation’s
affective component as perceived by the general public and its cognitive component as perceived by opinion leaders.
Research limitations/implications – The paper analyses only very large corporations in Germany over a limited period of time.
Practical implications – Managers cannot influence the course of a trans-national crisis, but they can immunise their company against its impacts by
managing financial and non-financial drivers of firm reputation within the various stakeholder groups.
Originality/value – The paper extends previous research on the value-relevance of corporate reputation by exploring the roles of different stakeholder
groups’ perceptions of the affective and cognitive component of reputation.
Keywords Corporate image, Stakeholders, Economic fluctuations, Financial performance
Paper type Research paper
An executive summary for managers and executive
readers can be found at the end of this article.
Financial crisis 5reputation crisis?
The financial crisis that began in 2008 had many unforeseen
consequences for stock markets all around the world. In
particular, we find evidence that companies’ market values
were substantially less reliant on intangible assets during the
start of the financial crisis. While the percentage of intangible
assets in terms of market capitalisation (proxied by the
market-to-book ratio of, for example, Germany’s top publicly
listed corporations) was about 70 per cent between 1990 and
2007, it fell to less than 40 per cent in 2008 (Schwaiger et al.,
2009). This is a strong indication of how investors’ credit in
the future profit and growth potential of companies has
suffered. These concerns about the stability and magnitude of
future cash flows may have been caused by events like the
Lehman Brothers collapse, the Madoff investment scandal, or
the sales collapse in the car sector, which have severely
damaged trust in top executives and their ability to manage
their companies clear-sightedly (Podolny, 2009).
Against this backdrop, the research question arises of
whether corporate reputation – generally understood as the
overall evaluation by various stakeholders (Fombrun, 1996)
and assumed to be an intangible asset crucial for the
performance and long-term success of a corporation (Hall,
1992) – may help to explain this destruction of the intangible
value of corporations. In particular, companies who were able
to protect their corporate reputation from erosion or even
improve their reputation level might have been less affected by
the negative impact of the financial crisis on firm value
(Sarstedt, 2009). Using a sample of the largest publicly listed
corporations in Germany pooled in the DAX as a leading
stock market index (see www.dax-indices.com/EN), this study
examines the value-relevance of corporate reputation during
the climax of the financial crisis in 2008.
However, this task raises some issues concerning the
operationalisation of corporate reputation. Many corporate
reputation measures have limitations. Often, they are
predominantly focused on the cognitive aspects of corporate
reputation and correspondingly suppress its affective aspects
(Fryxell and Wang, 1994). Additionally, many measures
overweight a limited respondent pool, relying solely on experts
(Fombrun et al., 2000). Toshed some new light on these issues,
we apply a measurement approach that considers both the
cognitive and the affective component of corporate reputation
(Schwaiger, 2004) while examining the perceptions of major
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
19/6 (2010) 389–400
qEmerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/10610421011085703]
The authors would like to thank the anonymous referee for their helpful
comments in the review process. The paper has greatly benefited from
their suggestions.
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