Effects of corporate governance on corporate reputation

Abstract

One of the most critical strategic and enduring assets that a corporation may possess is good reputation. The positive impact of corporate reputation on firm performance has been analyzed and documented for ages. Intangible assets like reputation are increasing their importance in companies as sources of sustainable advantages. Organizations used to look for tangible assets as the drivers of these advantages, but nowadays intangible ones are getting much more weight in this sense. This is why researchers are now focusing in the development of resources to measure these intangible assets as reputation. We could say that the reputation that a company has is constructed by the public of that organization. In fact, it is constructed on the basis of a company’s market position with respect to other companies in the industry. The construction is made with information such as market and accounting facts or information related to the performance of that organization. It can also come from experiences of satisfied consumers with the company’s products, hence it has been inherited from past action of the organization. Reputation can also arise from the combination of past actions of the organization and conscious image building and good public relations. Taking into account the importance that corporate reputation is starting to have in recent years, this paper analyzes the effects that good corporate governance has on it. In order to do so, we are going to use variables such as the presence of women on boards or the independence of the board of directors. So, the main singularity of this paper is that it places corporate reputation as the dependent variable and, furthermore, it relates it with variables such as female directors, which is currently focused of research. Going into these topics, The Unified Code of Good Corporate Governance (2002) and the “Ley 3/2007 of March 22nd ", for the effective equality between men and women, highlight the importance of gender diversity in board of directors as a way of increasing their levels of efficiency. We will see later how gender diversity affects positively on reputation, as well as independent directors do. The paper is organized as follows. Part 2 and 3 review the main theoretical ideas about corporate governance and corporate reputation, respectively. Part 4 deals with the empirical design, including the analysis and results, and Section 5 provides our conclusion.