Being famous matters: Evidence from cash flow volatility

Mohamed Shaker Ahmed and Marwa Elnahass

International Review of Financial Analysis, 2024, vol. 93, issue C

Abstract: Corporate reputation is a paramount driver of value creation and competitive advantage in the 21st century. Motivated by the importance of cash flows and the under-researched nature of their volatility in the corporate finance literature, we investigate the impact of corporate reputation on cash flow volatility. We developed unique hand-collected data from the Fortune world's most admired companies for a sample of U.S. companies from 2014 through 2020. The findings show that there is a negative relationship between corporate reputation and cash flow volatility. Our additional analyses demonstrate that the negative relationship between corporation reputation and cash flow volatility is stronger for firms with a higher company beta, higher earnings, and lower short-term liquidity. Our findings imply that improving corporate reputation can decrease the risk levels associated with operating performance.

Keywords: Corporate reputation; Cash flow volatility; Operating performance; Fortune's corporate reputation score (search for similar items in EconPapers)
JEL-codes: G12 G17 G32 G35 G40 M30 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:93:y:2024:i:c:s1057521924000978

DOI: 10.1016/j.irfa.2024.103165

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