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
Date Written: 2021
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: Suggested Citation