Reputational Risk and Firm Performance: Family Versus Nonfamily Firms in Different Regulatory Environment

46 Pages Posted: 19 Oct 2023

See all articles by Yuying Sun

Yuying Sun

University of Manitoba

Zhenyu Wu

University of Manitoba

Abstract

This paper explores the relationship between reputational risk and firm financial performance of both family and nonfamily firms. Relying on an international sample of over 5,000 listed firms from 2007 to 2019, we find that family firms are related to lower reputational risk, and they can further mitigate the negative effect of reputational risk on firm performance. However, these findings vary in different macro-regulatory environments. More interesting, in countries with poor regulatory quality, the effect of reputational risk on performance becomes positive, and family firms strengthen such positive influence. Our justification for the findings is mainly based on the socioemotional wealth (SEW) theory and rent-seeking theory.

Keywords: Family firms, Reputational risk, Regulatory environment, Socioemotional wealth (SEW)

Suggested Citation

Sun, Yuying and Wu, Zhenyu, Reputational Risk and Firm Performance: Family Versus Nonfamily Firms in Different Regulatory Environment. Available at SSRN: https://ssrn.com/abstract=4606736 or http://dx.doi.org/10.2139/ssrn.4606736

Yuying Sun (Contact Author)

University of Manitoba ( email )

501 F.A. Bldg
Winnipeg R3T 5V4, R3T 5V5
Canada

Zhenyu Wu

University of Manitoba

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