Financial Consequences of Reputational Damage: Evidence from Government Economic Incentives

Blank, D. B., Hadley, B., & Unsal, O. (2021). Financial consequences of reputational damage: Evidence from government economic incentives. Financial Review, 56(4), 693-719.

Posted: 7 Jun 2022

See all articles by Brian Blank

Brian Blank

Mississippi State University

Brandy Hadley

Appalachian State University - Finance, Banking & Insurance

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance

Date Written: 2021

Abstract

We investigate and quantify the financial consequences of corporate reputation by using manually assembled litigation, fraud, and cyberattack data from 2000 to 2018 to measure reputation changes following events that are often tied to public scrutiny. We examine the role of reputation in government subsidy awards and find reputational damage is linked to lower subsidies and Mega Deals, particularly tax‐related and state government awards. Moreover, subsidies only relate to higher firm value for firms without reputational damage. Our findings suggest that reputation is an important determinant of relatively opaque economic incentive awards and that reputational damage constrains the benefits thereof.

Keywords: corporate reputation and political economy, cybersecurity and data breach, financial fraud and violations, government subsidy awards, securities litigation

JEL Classification: G32, H71, M14

Suggested Citation

Blank II, Douglas Brian and Hadley, Brandy and Unsal, Omer, Financial Consequences of Reputational Damage: Evidence from Government Economic Incentives (2021). Blank, D. B., Hadley, B., & Unsal, O. (2021). Financial consequences of reputational damage: Evidence from government economic incentives. Financial Review, 56(4), 693-719., Available at SSRN: https://ssrn.com/abstract=4117791

Douglas Brian Blank II

Mississippi State University ( email )

Mississippi State, MS 39762
United States
(662) 325-5910 (Phone)

Brandy Hadley

Appalachian State University - Finance, Banking & Insurance ( email )

Boone, NC 28608
United States

Omer Unsal (Contact Author)

Merrimack College - Girard School of Business - Department of Accounting and Finance ( email )

315 Turnpike St
North Andover, MA 01845
United States

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