Corporate Reputation, Financial Performance and Earnings Quality

An important issue frequently assessed by investors is the quality of reported financial information. Recent research suggests a relationship between corporate reputation (CR) and the quality of reported information. This paper examines the association between CR and earnings quality of the firms operating in a European market. We use a two-stage method, applying a cross-sectional accruals-based measure as a proxy for earnings quality, and a regression analysis to detect relationship between earnings quality and CR. Our results suggest that most reputable companies also have superior earnings quality. These findings may increase the confidence of investors in assessing the earnings quality of firms with a higher CR. It may also be of interest to business managers who are establishing a corporate strategy based on CR.