Corporate reputation is a double-edged sword for companies

Abstract

Corporate reputation is a double-edged sword for companies. While a good corporate reputation has benefits, a good corporate reputation can also bring disadvantages. A good corporate reputation can lead managers to overestimate the level of corporate risk-taking and can hide internal corporate defects. In addition, corporate reputation may exacerbate the impact of negative events: a good corporate reputation buffers the impact of risky events in a conventional scenario, but in a crisis scenario, a good corporate reputation increases the impact of negative events, while an average corporate reputation reduces the impact of negative events. The purpose of this paper is to explore the negative effects of corporate reputation on firms and the means to prevent them.