Internal Reputation of the Firm: CEO Retention and Firm Market Performance

Abstract

Previous studies have explored the effect of reputation on firm operations and firm outcomes such as employee retention, firm performance, the intensity of regulation, and customer loyalty. Using longitudinal data, this study investigates the effect of internal reputation of the firm on two understudied outcomes: (1) CEO retention and (2) firm market performance. We employed social identity theory to examine the relationship between firm internal reputation and CEO retention. In addition, we adopted the resource-based view of the firm to investigate the effect of internal reputation on firm market performance over time in three time frames (short-term, midterm, and long-term). The results show a high-quality internal reputation is positively related to CEO retention. In addition, a positive internal reputation is associated with higher firm market performance not only in the short-term but also in the midterm and long-term.