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Meta-analytic Review of Firm Reputation and Firm Performance

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Abstract

Firm reputation provides the referential barometer to evaluate firm performance. This meta-analysis examined the past four decades of firm reputation studies to investigate the relationship between firm reputation and firm performance by attempting to solve the ongoing causality and effect size issues between the two constructs. The results indicate that firm performance has a stronger effect of influencing firm reputation using signaling theory. The effect size between firm reputation and firm performance was weaker during reputation-damaging events. The results of this quantitative review suggest that researchers need to be cautious about the generalizability of their studies when investigating the relationship between firm reputation and firm performance.

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The meta-analytic review was conducted based on published work. Coding insturctions are availiable upon request from the author.

Notes

  1. In his seminal work on information economies, Spence (1973) explains the signaling function of education in the labor market and demonstrates how the unobservable characteristics and abilities of a job candidate can be presumed by their educational background (Connelly et al. 2011). Certainly information asymmetry is important in the labor market since firms cannot be fully aware of the characteristics and behavioral intentions of job candidates (Elitzur and Gavious 2003). Accordingly, job candidates signal their characteristics and behavioral intentions through their educational background, and distinguish themselves from other competitors using these signals. Even though managers may not have perfect information about each job candidate, managers must make a decision based on what is available to them. Just as a firm assesses the abilities of job candidates using signals provided by their educational background, stakeholders, who possess limited information about a firm, evaluate the value and behavioral intentions of the firm based on signals that are available to them, and arguably, comparative FP is a critical signal. Thus, managers can strategize to signal pertinent information to the market through various means in order to distinguish themselves from competitors.

  2. Most empirical studies utilized in this quantitative integration provided their correlation tables. However, when this was not true (i.e., results of t-test, F-test, Z-test, or distances were presented instead), the reported effects were transformed into the equivalent of an effect size r using conversion formulae developed by Rosenthal and Rosnow (1991) and Hunter and Schmidt (2004). We used the following formula: \(r = \sqrt {\frac{{t^{2} }}{{t^{2} + df}}}\) for t-test statistics, \(r = \sqrt {\frac{F}{F + df}}\) for F-test statistics, \(r = \sqrt {\frac{{Z^{2} }}{N}}\) for Z-test statistics, and \(r = \sqrt {\frac{d}{{d^{2} + 4}}}\) for distances.

  3. The articles were selected from a total of 27 different academic journals encompassing the years 1980 to 2022: (1) the seven marketing journals (Journal of Marketing, Journal of Marketing Research, Marketing Science, and Journal of Consumer Psychology, Journal of the Academy of Marketing Science, Journal of Retailing, Industrial Marketing Management), (2) the seven management journals (Academy of Management Journal, Administrative Science Quarterly, Journal of Applied Psychology, Journal of Management, Organization Science, Management Science and Strategic Management Journal), (3) the three accounting journals (Accounting Review, Journal of Accounting Research, and Journal of Accounting and Economics), (4) the three finance journals (Journal of Finance, Journal of Financial Economics, and Review of Financial Studies), (5) the four economics journals (The American Economic Review, Journal of Political Economy, Long Range Planning and Journal of Law and Economics), (6) two interdisciplinary journals (Journal of Business Research and Journal of International Business Studies), and (7) two scholarly journals that are dedicated to the themes of corporate reputation and ethics, Corporate Reputation Review and Journal of Business Ethics.

  4. Good examples of such categorizations of financial FP in meta-analytic studies are Margolis, Elfenbein, and Walsh (2009) and Orlitzky, Schmidt, and Rynes (2003).

  5. Waddock and Graves (1997) argued that there is a simultaneous relationship between FR and FP, suggesting that FR is positively associated with prior FP, while also positively associated with future FP.

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    Hyo Jin Jean Jeon & John Nolan

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Jeon, H.J.J., Nolan, J. Meta-analytic Review of Firm Reputation and Firm Performance. Corp Reputation Rev (2023). https://doi.org/10.1057/s41299-023-00167-x

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