Regulatory agencies, reputational threats, and communicative responses

Abstract

AbstractA key claim in bureaucratic reputation literature is that reputation has several dimensions. This presents agencies with a difficult choice concerning which dimension(s) they should emphasize in the management of their reputation. This paper analyzes how regulatory agencies manage their reputation through communicative responses to public judgments, based on a single‐case study of the German financial regulator BaFin. Our theoretical argument underscores the importance of different reputational dimensions for regulatory agencies that simultaneously considers their distinct reputation reserves. Our main finding was that BaFin prioritizes responses to public judgments targeting reputational dimensions that are central to its mission and for which the agency has a weak reputation, as opposed to judgments targeting dimensions that are central to its mission and for which it has a strong reputation, or judgments targeting peripheral dimensions. The paper demonstrates the importance of agency missions for reputation management and suggests directions for further research.