Competing in the Capital Market with a Good Reputation

This study investigates how a good reputation generates competitiveness for a firm in the capital market. We distinguish two aspects of corporate reputation – trustworthiness and attractiveness – and identify their distinct impacts on reducing management and business risks of investors, respectively...

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Bibliographic Details
Published in:Corporate reputation review 2012-09, Vol.15 (3), p.198-221
Main Authors: Wang, Yijing, Berens, Guido, van Riel, Cees B M
Format: Article
Language:English
Subjects:
Behavior
Business and Management
Capital markets
Capital structure
Cash flow
Competition
Competitive advantage
Corporate Communication/Public Relations
Debt financing
Institutional investments
Management
Marketing
Original Article
Reputation management
Strategic management
Studies
Trust
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Summary:This study investigates how a good reputation generates competitiveness for a firm in the capital market. We distinguish two aspects of corporate reputation – trustworthiness and attractiveness – and identify their distinct impacts on reducing management and business risks of investors, respectively. Our findings suggest that trustworthiness enhances investors’ expectations regarding a firm's motives, and gains the firm a competitive advantage from holding a low financing cost. Attractiveness, on the other hand, reduces investors’ uncertainty regarding a firm's ability, and generates the firm a competitive advantage from a high flexibility in choosing different financing instruments. We further demonstrate the impacts of these two types of competitive advantage on the capital structure management of a firm.
ISSN:1363-3589
1479-1889
DOI:10.1057/crr.2012.7