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Institutions and Corporate Reputation: Evidence from Public Debt Markets

Gu, Xian; Hasan, Iftekhar; Lu, Haitian

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Authors

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Dr Xian Gu xian.gu@durham.ac.uk
Associate Professor in Finance

Iftekhar Hasan

Haitian Lu



Abstract

Using data from China’s public debt markets, we study the value of corporate reputation and how it interacts with legal and cultural forces to assure accountability. Exploring lawsuits that change corporate reputation, we find that firms involved in lawsuits experience a decrease in bond values and a tightening of borrowing terms. Using the heterogeneities in legal and social capital environments across Chinese provinces, we find the effects are more pronounced for private firms, firms headquartered in provinces with low legal protections, and firms headquartered in provinces with high social capital. The results show that lawsuits that allege misconduct are associated with reputational penalties and that such penalties serve as substitutes for legal protections and as complements to cultural forces to provide ex post accountability and motivate ex ante trust.

Citation

Gu, X., Hasan, I., & Lu, H. (2022). Institutions and Corporate Reputation: Evidence from Public Debt Markets. Journal of Business Ethics, https://doi.org/10.1007/s10551-021-05020-x

Journal Article Type Article
Acceptance Date Dec 11, 2021
Online Publication Date Jan 25, 2022
Publication Date 2022
Deposit Date Feb 9, 2022
Publicly Available Date Jan 25, 2023
Journal Journal of Business Ethics
Print ISSN 0167-4544
Electronic ISSN 1573-0697
Publisher Springer
Peer Reviewed Peer Reviewed
DOI https://doi.org/10.1007/s10551-021-05020-x
Public URL https://durham-repository.worktribe.com/output/1214453

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Copyright Statement
This version of the article has been accepted for publication, after peer review (when applicable) and is subject to Springer Nature’s AM terms of use, but is not the Version of Record and does not reflect post-acceptance improvements, or any corrections. The Version of Record is available online at: https://doi.org/10.1007/s10551-021-05020-x





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