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Financial consequences of reputational damage: Evidence from government economic incentives

Brian Blank (), Brandy Hadley and Omer Unsal

The Financial Review, 2021, vol. 56, issue 4, 693-719

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.

Date: 2021
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Handle: RePEc:bla:finrev:v:56:y:2021:i:4:p:693-719