Internal Reputation of the Firm: CEO Retention and Firm Market Performance
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ORIGINAL ARTICLE
Internal Reputation of the Firm: CEO Retention and Firm Market Performance Kaveh Moghaddam1 · Thomas Weber2 · Pouya Seifzadeh3 · Sara Azarpanah4
© Springer Nature Limited 2020
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. Keywords Internal reputation · CEO retention · Firm market performance
Introduction Previous literature suggests that a positive corporate reputation may improve firm performance (Boyd et al. 2010; Davies et al. 2010; McMillan-Capehart et al. 2010), increase sales (Chun 2005), improve a firm’s innovative capabilities (Ou and Hsu 2013), encourage investors to invest (Chun 2005), and appease activist groups (Lourenço et al. 2014). However, the extant literature lacks studies that examine * Thomas Weber [email protected] Kaveh Moghaddam [email protected] Pouya Seifzadeh [email protected] Sara Azarpanah [email protected] 1
School of Business, University of Houston – Victoria, 22400 Grand Cir Blvd, Katy, TX 77449, USA
2
Romain College of Business, University of Southern Indiana, 8600 University Boulevard, Evansville, IN 47712, USA
3
School of Business, State University of New York College At Geneseo, 1 College Circle, Geneseo, NY 14454, USA
4
Lone Star College - Houston North, 250 N Sam Houston Pkwy E, Houston, TX 77060, USA
the relationship between corporate reputation and CEO retention; although, there is a suggestion that employees in general have longer tenure with companies that have good reputations (Chun 2005). The literature also suggests that reputation is built over time (Herbig et al. 1994), but there is a scarcity of empirical, longitudinal studies that investigate the long-term impact of reputation on firm performance. Therefore, this study focuses on these two understudied yet important outcomes, namely: CEO retention and firm market performance. While corporate reputation from the perspective of external stakeholders such as the community and stockholders has been well studied in the literature, there is a dearth of research examining corporate reputation from the perspective of internal stakeholders, most importantly, employees and specifically
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