The value of reputation capital during the COVID-19 crisis: Evidence from Japan

Tomonori Manabe; Kei Nakagawa

doi:10.1016/j.frl.2021.102370

The value of reputation capital during the COVID-19 crisis: Evidence from Japan

Financ Res Lett. 2022 May:46:102370. doi: 10.1016/j.frl.2021.102370. Epub 2021 Aug 17.

Authors

Tomonori Manabe¹, Kei Nakagawa²

Affiliations

¹ Sansan, Inc., Aoyama Oval Building 13F, 5-52-2 Jingumae, Shibuya-ku, Tokyo, 150-0001, Japan.
² Nomura Asset Management Co., Ltd., 2-2-1, Toyosu, Koto-ku, Tokyo 135-0061, Japan.

Abstract

This study investigates the value of reputation capital with regard to the stock market crash in the early stages of the COVID-19 pandemic. At that time, when stock prices fell precipitously, firms with a positive reputation for the usefulness of products/services seen from within their business network showed stock returns five to seven percentage points higher than firms with a low reputation score. This suggests a positive reputation among stakeholders can serve as insurance against shocks in times of crisis. Notably, results suggest firms that can build public trust owing to the usefulness of the product/service are more resilient from crash caused by real economic damage, as occurred with the COVID-19-related crash.

Keywords: COVID-19; Corporate reputation; Crash risk; Reputation capital; Stakeholder.