Definitions and measures of corporate reputation in accounting and management: commonalities, differences, and future research

Abstract

This study reviews and compares the definitions and measurements of ‘corporate reputation’ used in 173 studies published in seven top-tier accounting and management journals between 1980 and 2020. Accounting scholars frequently fail to define ‘reputation,’ and if they do, definitions vary considerably between the accounting and management fields. We further find that measures of reputation do not fit well with its definition. The accounting literature often employs secondary financial measures, which poorly reflect stakeholders’ reputation assessments. We develop a conceptual framework to better classify prior research and identify appropriate measures of reputation that match the chosen definition. We also suggest a number of further research opportunities: Accounting scholars may focus more on (a) stakeholders’ subjective nonfinancial assessments; (b) the emotional appeal of companies and its relationship with competence and integrity assessments; (c) the role of stakeholders’ normative expectations and (d) explicitly consider a multi-stakeholder perspective, where corporations have multiple reputations rather than one.

Keywords:

• corporate reputation in accounting
• reputation definition
• reputation measurement
• literature review

Acknowledgements

We are grateful to Jonathan Bundy, Grahame Dowling, Maik Lachmann, two anonymous reviewers and the editors for providing valuable comments on earlier versions of this paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplemental data

Supplemental data for this article can be accessed at https://doi.org/10.1080/00014788.2022.2149458.

Notes

1 The journal selection is based on harzing.com which collates nine different journal rankings. The four accounting journals have the highest number of top positions in the rankings surveyed by harzing.com (TAR: 7, JAE: 7, JAR: 6, AOS: 5).

2 ASQ, AMJ, and SMJ have each nine top positions in the nine journal rankings collated by harzing.com. Academy of Management Review (also nine top positions) has been excluded because this outlet does not publish empirical research.

3 There is also a body of reputation literature in economics which the accounting literature (implicitly) refers to. This paper examines the management literature, because first, there is a long tradition of reputation research in this field, and second, there is a variety of reputation definitions and measurements in the management domain, which facilitates the development of a synthesized conceptualization of reputation.

4 Bushman and Wittenberg-Moerman (2012) define the reputation of a lead bank by its average market share of the syndicated loan market, but this is a measurement of reputation rather than a definition.

5 See, for instance, King (1996), Chen et al. (2008), Williams (1996), Graham et al. (2014), Simnett et al. (2009), and Lim and Tan (2008).

6 Demski and Sappington (1993) do not define reputation explicitly, but model it as a supplier’s updated assessment of a buyer’s honesty based on the buyer’s report.

7 To give credit to the original authors of the definition/measurement employed and to show the links between different studies, the references mention the original sources, even if they are not published in one of the reviewed accounting or management journals. Tables A1 to A4 in the Web Appendix link the original source with the papers reviewed.

8 For readability, the references include only selected papers.

9 Note that Tables 2–5 as well as Figure 3 focus on the most important measurement categories. But not all measures observed in the literature fall into one of the three major categories. For instance, audit firm reputation is sometimes measured by audit firm tenure (Deis and Giroux 1992), by investor bids (Mayhew 2001) or by repeated interaction (Koch and Schmidt 2010). For a complete list of measures see Tables A3 and A4 in the Web Appendix. Further, some papers do not measure reputation. Accordingly, the number of papers can vary between Table 1/Figure 1 and Tables 2–5/Figure 3.

10 Tables A3 and A4 in the Web Appendix list all the measures found in the accounting and management literature. The selection for Table 2 does not imply that the non-selected measures or studies are inferior or less suitable.

11 Especially in experimental settings, manager reputation often has the notion of repeated interaction (DeJong et al. 1985, Koch and Schmidt 2010).

12 In an experimental setting, King (1996) proxied a buyer’s assessment of a seller’s truthful reporting by the buyer’s bid. Price and other effects in experimental or real markets are consequences rather than measurements of changing assessments. Nevertheless, they are partly employed as measurements of reputation. For the market consequences of (impaired) reputation, see, e.g. Brozovsky and Richardson (1998), Chaney and Philipich (2002), Weber et al. (2008), Karpoff et al. (2008), and Skinner and Srinivasan (2012).

13 Cook et al. (2020) measured audit firm reputation by the misconduct of audit firms’ clients, such as complaints about unsuitable investments or excessive trading. Misconduct can be related to violations of civil law, criminal law, or public law. In an experiment by Wainberg et al. (2013), participants assessed audit firm quality by the number of deficiencies mentioned in the mandatory inspection report by the audit firm.

14 In case of the reverse regression (reputation is the outcome in the model), the estimation bias is away from zero and inflates type I error (Wansbeek and Meijer 2001). In this reverse regression, instrumental variables cannot be applied.

15 A few studies use specialized rating scales (e.g. Hodge et al. 2006). For example, the average rating stars assigned by platforms such as TripAdvisor or eBay are used to show platform users the quality of somebody (e.g. seller) or something (e.g. product). Although such ratings most likely show positive correlations with the product-related attributes of reputation, they are not proxies for reputation per se.

16 https://fortune.com/franchise-list-page/methodology-worlds-most-admired-companies-2022/

17 One survey-based reputation measure is available on a daily basis but does only cover a very narrow definition of reputation and captures only the perceptions of consumers (Luo et al. 2013).