Corporate reputation and firm performance: Evidence from Italy

Intangible assets (i.e. intellectual capital, brand, patents, R&D) have a strategic role in creating value for company. According to Fombrun (1996) corporate reputation is defined as “a perceptual representation of a company’s past actions and future prospects that describes the firm’s overall appeal to all of its key constituents when compared with other leading rivals” (p.72). ‘Reputation’ is increasingly recognized for its influence on stakeholder support and engagement with companies (Fombrun, 1996; 2012). Corporate reputation (CR), which represents the knowledge and sentiment that stakeholders hold about a company, can lead to long-term benefits and sustainable growth for a company (e.g., Waddock and Graves, 1997; Walker, 2010). Positive CR helps in better sustaining strong profit outcomes over time (Roberts and Dowling, 2002). Several studies have focused on the relationship between corporate reputation and firm performance with mixed results. Based on previous research this study extends the literature on corporate reputation (managerial reputation) and firm performance. Benefiting from upper echelons theory (Hambrick and Mason, 1984), this paper investigates a sample of 68 listed and unlisted Italian firms for 220 firm-year observations during the period 2017-2020. The sample includes eight economic sectors (i.e., energy, industry, infrastructure, fashion & beauty, food & retail, media & telco, transports, and sport). Using three econometric models (Logit, Probit and Weighted Least Squares Estimation (WLS)) this study finds a positive relationship between the score as calculated by Top Manager Reputation and firm performance as measured by DUMMY_ROA (return on assets).