The interdependence of corporate reputation and ownership: A network approach to quantify reputation

Abstract

We propose a novel way to measure the reputation of firms by using information about their ownership structure. Supported by the signaling theory, we argue that ownership relations channel reputation spillovers between shareholders and their invested companies. We model such reputation spillovers by means of a simple dynamics that runs on the ownership network, constructed from available data bases. We focus on the core of the global ownership network with 1'300 firms and 12'100 ownership links. Our method assigns a ownership-based reputation value to each firm, used to provide a quantitative reputation ranking. We compare our ranking with alternative rankings, to confirm that the top ranked firms are correctly identified. We also demonstrate that our reputation measure does not correlate substantially with operating revenue or control and thus provides additional information about firms.