Does the Reputation Matter? Corporate Reputation and Earnings Quality

Abstract

Good corporate reputations are critical because of their potential for value creation, but also because their intangible character makes replication by competing firms considerably more difficult. This paper tests the relationship between the reputation and the earnings quality. Though I find no evidence to support that companies with good reputation share superior earnings relative to the corresponding industry levels, I do find the evidence that the reputation is not only positively correlated with superior earnings quality, but also does have positive effect on superior earnings quality, as well as the superior total sales do in Chinese public companies.

Keywords: Reputation, Accruals, Cash flow components, Earnings quality

JEL Classification: L14, M41, M43, M47, M14, P27