The definition of Corporate reputation is not consensual in the literature review. Weigelt & Camerer (1988) defined corporate reputation as a set of attributes assigned to firms, inferred from firms' past actions. According to Fombrun & van Riel (1997), there are six different constructs for the corporate reputation definition: (1) economic; (2) strategic; (3) marketing; (4) organizational; (5) sociological and (6) accounting. Fombrun et al. (2000) suggested that corporate reputation denotes a collective construct that describes the aggregate perceptions of multiple stakeholders over the firm's operation. Since corporate performance is a multi-dimensional construct, so is reputation, wherein it should reflect the unique dimensions on which stakeholders base their judgments about the firm's performance.

One of the main barriers to the creation of a universal definition was related to the confusion concerning the concepts of identity, image, and reputation (Barnett et al., 2006). Barnett et al. (2006) attempted to define this concept as: “observers’ collective judgments of a corporation based on assessments of the financial, social, and environmental impacts attributed to the corporation over time”.

Media rankings are the most standard measures of reputation, and within this literature Fortune's World Most Admired Companies (WMAC) is highlighted as one of the most cited (Chun, 2005; Fombrun et al., 2000). Concerning Brown & Perry's (1994) research, Fortune's annual list of the WMAC, published early each year since 1983, ranks large corporations on the following eight qualitative attributes: (1) financial soundness; (2) long-term investment value; (3) use of corporate assets; (4) innovativeness; (5) quality of a firm's management; (6) quality of its products and services; (7) ability to attract, develop, and keep talented people; and (8) acknowledgment of social responsibility. According to Brown & Perry (1994), Fortune collects data on the largest firms in over 30 industries, where 8,000 executives, directors, and market analysts are included in the survey sample, wherein each of them reports on the industry they follow.

Fortune's WMAC ranking has had a response rate of over 50 percent, an indicator that describes Fortune's survey samples as probably the largest within their scope (Brown & Perry, 1994). Brown & Perry (1994) also underlined that Fortune's results are widely circulated and cited in popular press outlets. Furthermore, it offers data from a large sample of industry experts assessing qualitative dimensions of organizational performance that are difficult to measure quantitatively. According to Fombrun & van Riel (1997), reputation measured through surveys presents some weaknesses, for instance, most are biased in evaluating firms and choosing evaluation and ranking criteria. Therefore, according to Fombrun & van Riel (1997) and Walker (2010), it is necessary a measure of corporate reputation that presupposes the aggregation of the opinions of different stakeholders, valuing both the analysis dimensions and the evaluation criteria. It is important to group the opinions of different stakeholder groups, as each group values ​​different dimensions in a different way (Walker, 2010) since the current ones only reflect the vision of a group of stakeholders (Deephouse, 1997; Walker, 2010). According to Brown & Perry (1994) and Fryxell & Wang (1994), financial performance influences the firms ranking in the “Most Admired Companies” Fortune's ranking, there is a financial halo underlying the database that appears to be predominantly financial in its construction. This limitation is because respondents are “experts”, whose analysis focuses only on a group of stakeholders, executives, and financial analysts, who tend to give more importance to financial aspects (Fryxell & Wang, 1994). Numerous authors trusted media rankings. The fact that reputation ranking is communicated through the media has an impact on the reputation itself because the media act as an intermediary in quality signaling (OuYang et al. 2017). This is because communication influences the perception of firm activities (Floreddu et al., 2014), and thus communication may improve reputation (Aula, 2011). Žabkar & Arslanagić-Kalajdžić (2013) reinforce this idea by mentioning that corporate communication builds, protects, and maintains corporate reputation.

The Reputation Institute launched in 1998 a global project to fill the gap of a valid instrument to measure reputation, which resulted in the development of the Reputation Quotient (RQ) in partnership with Harris Interactive (Fombrun et al., 2000; Gardberg & Fombrun, 2002; Ponzi et al., 2011). It is one of the most popular measures of corporate reputation used by academics (Shamma, 2012). Reputation Quotient is a list of 32 items that take into account the different reputation perceptions of different stakeholder groups concerning the firm: (1) emotional appeal; (2) products and services; (3) vision and leadership; (4) social and environmental responsibility; (5) workplace environment; and (6) financial performance. Wartick (2002) states that the Reputation Quotient (RQ) is a good measure of reputation because it is broad and generic enough, which makes it more applicable to most stakeholder groups and most cultural contexts. According to Kanto et al. (2016) Reputation Quotient (RQ) is the best tool to assess corporate reputation. It has emerged as a valid, reliable, and robust tool to measure corporate reputation (Fombrun et al., 2000; Gardberg & Fombrun, 2002). Furthermore, it was also validated cross-culturally, that is, in several countries (Ponzi et al., 2011).

Literature also emphasizes other annual worldwide reputation rankings such as the Financial Times World's Most Respected Companies, Britain's Most Admired Companies from Management Today, and Asia's Most Admired Companies by Asian Business, Spanish Monitor of Corporate Reputation (Chun, 2005; Fombrun et al., 2000; and Sánchez & Sotorrío, 2007).

However, the use of rankings may present some limitations, such as the incorporation of public traded companies and a limited respondent pool on which those rankings are built (Fombrun et al., 2000). Nevertheless, the advantages gained by the use of media rankings go beyond the limitations pointed out.

In the literature, there is much research concerning the relationship between reputation and firms’ financial performance. According to Brammer et al. (2004) and Brammer et al. (2009), we could have three possible market reactions to firms’ reputations: i) based on the market efficiency, it is not expected that when investing in reputable firms that allow obtaining positive abnormal returns once share price automatically adjusts to reputation information. Reputation is not an event per se, but a set of events (such as the decision to increase employee salaries, the decision to offer benefits to community members, and product recalls), and thus each of the these 'events' would have induced changes in the stock price (Abraham et al., 2008); ii) conversely, financial analysts and most academic studies suggest that the corporate reputation will have a positive impact on future stock prices; iii) and finally it may be possible to reach a negative relationship as a result of market overreaction.

Most studies have confirmed the existence of a relevant and positive relationship between corporate reputation and firms' financial performance, using Fortune's rankings as a measure for reputation such as McGuire et al. (1990), Roberts & Dowling (2002) and Lee & Roh (2012).

Findings from Hammond & Slocum (1996), using a sample of 149 firms from a 1993 Fortune's Most Admired list, suggested that, in order to keep their firm's reputation, management must be able to control costs and deliver dividends to investors as close to their expectations as possible. Thus, and according to the same authors, the short-term profit should not be the single goal of management, since most investors are risk-averse.

Through correlations and regression analysis, and with a sample of 131 U.S. firms, McGuire et al. (1990) found that firm and its management quality influence a firm's future financial performance.

Likewise, Pfarrer et al. (2010) explored the effects of two intangible assets, (1) the firm's reputation and (2) the firm's celebrity, on organizational outcomes. To perform that, the same authors analyzed 291 firms between 1991 and 2005 that appeared in Fortune's Most Admired Companies. Findings led Pfarrer et al. (2010) to suggest that reputable firms, when compared to low-reputable ones, might experience greater market rewards for positive surprises, and smaller market penalties for negative announcements.

Additionally, Roberts & Dowling (2002) also studied corporate reputation and its possible correlation with a sustained superior firm's performance over time. To achieve such a goal, Roberts & Dowling (2002) used reputation data from 540 firms, between 1984 and 1998, embedded in Fortune's 1000 annual ranking. Results supported the evidence that superior-performing firms with good reputation standards, found themselves with an advantage that was durable in the short run.

Using non-media measure tools, other authors also explored and found positive associations between corporate reputation and firms' financial performance (Sánchez & Sotorrío, 2007; Tischer & Hildebrandt, 2014; Raithel & Schwaiger, 2015).

Sánchez & Sotorrío (2007), for instance, proposed a theoretical model which could explain the process of value creation from reputation generated by firms. Therefore, the same authors built a sample containing the 88 most reputable firms in Spain during 2004. In this situation, Sánchez & Sotorrío (2007) based their reputation data on MERCO, a Spanish indicator of firms' reputation. Results obtained suggested that the process of value creation, through reputation, was influenced by a series of contingent factors such as differentiation strategy, competitive intensity, and power of stakeholders.

Tischer & Hildebrandt (2014) conducted an event study with the intent to explore the impact of reputation changes on stock prices on the Frankfurt stock exchange. They used a reputation measure ranking range from a German Business Periodical. Results suggested that the announcement changes had an impact on the shareholders' value.

Raithel & Schwaiger (2015) demonstrated how shareholder's value, measured by future stock returns (using the augmented Fama & French model), behaved in terms of reputation perceptions issued by the general public. In this study, the authors created a reputation score using a sample obtained from 1,251 to 2,465 telephone interviews, where respondents were asked to answer questions about the 30 leading German security companies listed on DAX (Deutscher Aktienindex). Results attested that superior reputation perceptions issued by the general public increased the shareholder's value, creating more wealth for the shareholder in terms of positive abnormal stock returns in the long term. Furthermore, Raithel & Schwaiger (2015) indicated that reputation perceptions that are driven by non-financial aspects might create significantly more shareholder value in the future than reputation perceptions driven by previous financial performance.

According to the literature, some other authors took a different approach from those previously presented. Hannon & Milkovich (1996) use an event study on the effects of human resources signals (including "better for blacks, “most preferred”, “100 best to work for”, “better for working moms”, better for women "and" better for black engineers") conclude that most reputation measures used do not impact abnormal profitability. Carmeli & Tishler (2005), for instance, explored the relationship between organizational reputation and a firm's performance by looking at the firm's performance as a multidimensional measure. They used a sample composed of 86 industrial firms based in Israel. Through descriptive statistics and a path analysis, the authors showed that reputation was not directly associated with financial performance but rather indirectly through the firm's growth. Additionally, Rose & Thomsen (2004) used image ratings from a Danish business periodical as a proxy of reputation. The authors performed descriptive statistics and factor analysis with support from 263 joint firm-year observations, between 1996 and 2001, of image and market-to-book value from a sample of 62 firms. Their research findings challenged the conventional wisdom since results showed that financial performance improves the corporate reputation, but corporate reputation does not impact the market to book value of equity. Abraham et al. (2008) using the Reputation Quotient index, and comparing the 30 firms with the highest reputation score and the 30 firms with the lowest reputation score, during the period between 2001 and 2005, they conclude that there are no significant differences.

Rational investors are risk-averse, in this sense that, when faced with two firms with similar levels of return, they prefer to invest in the one with the lowest risk (Brammer & Millington, 2005; Fombrun & Shanley, 1990). The impact of the corporate reputation level on risk has not been the object of much study and the results are still controversial.

Srivastava et al. (1997), with a sample composed of 205 firms listed in Fortune's WMAC 1990, analyze the impact of reputation on risk, only considering firms listed on a reputation ranking. The authors conclude that the reputation increases the risk accepted by the investor without the increase in the required return. Contrary to Srivastava et al. (1997), the present study simultaneously analyzes the reputation effect on return and risk.

Using the brand power as a reputation measure on a database composed of 80 public firms for a period of 3 days between October 24-28 of 1997, Gregory's (1998) study analyzes the investors' familiarity with the firm's brand and how much they have a good perception about the firm. The author concludes that firms with higher reputation support higher market volatility. The main difference between Gregory's (1998) study and the present work is the measure of reputation used. This study uses a reputation measure which is constructed by taking into account eight qualitative attributes: (1) financial soundness; (2) long-term investment value; (3) use of corporate assets; (4) innovativeness; (5) quality of a firm's management; (6) quality of its products and services; (7) ability to attract, develop, and keep talented people; and (8) acknowledgment of social responsibility.

In line with Gregory's (1998) study, Jones et al. (2000), based on data from the stock market crash in 1987 and 1989, aim to analyze the impact of reputation and risk on the subsequent stock price. They conclude that reputation protects investors in crisis times.

Using 323 firm-year observations between 1999-2007, Krueger et al. (2010) study the impact of reputation changes (measured by Reputation Quotient Score changes) on risk. According to the authors, the improvement of the reputation seems to reduce the risk. Differently, the present study aims to compare the more and less reputed firms.

Finally, Delgado-García et al. (2013), using a database composed of 157 Spanish quoted firms for the 2001 to 2007 period, analyze the direct effect of reputation on risk, using the risk as the dependent variable. They conclude that being a reputed firm decreases the specific and total risk however increases the systematic risk. The authors, analyzing only the reputed firms, conclude that it is not the level of reputation that influences the risk but the fact that it is reputed or not reputed. In opposition, in the present study, it is considered the impact to be reputed or not on return adjusted to the risk, which means it is analyzed the changes by being reputed on the abnormal return and simultaneously on the alteration of the sensitivity of the firms’ return to the market return. In this sense, this study allows us to conclude whether a listed firm on a reputation ranking has a different systematic risk from a non-listed firm, highlighting the importance of corporate reputation communication through a media ranking.

Krueger & Wrolstad (2016) studied the relationship between reputation and return and risk using the top 10 firms with the highest reputation score on Reputation Quotient compared to an equal number of firms with a lower reputation score for 14 years (2000 to 2014). They concluded that firms with the highest reputation score tend to have lower risk, whether measured in terms of systematic risk or total risk.

Brahmana et al. (2020), who examines 256 non-financial firms in Indonesia for the period 2011 to 2015 using the Forbes Top 50 Best companies, conclude that reputation is an important factor for market-based risk.

Finally, Pfister et al. (2020) with a regression of the raw reputation scores against factors known to affect the general public perception, analyze the impact of reputation on the cost of equity of German blue-chip firms between 2005 and 2011. They conclude that reputation leads to a significant increase in the future cost of equity within 6 months, not having a significant impact in the short term.

As seen in the previous section, the relationship between corporate reputation and a firm's financial performance has received some attention in the scientific field. This research follows this association which is widely described in the literature. Roberts & Dowling (2002), for instance, realized that firms that possess relatively good reputation standards experience higher chances of sustaining superior performance over time. Sharpe (1964) described expected returns as an inverse function of systematic risk. According to Hong & Sakar (2007), higher volatility implies higher systematic risk and, based on Bravo (2016), a higher reputation implies lower volatility.Thus, according to Krueger & Wrolstad (2010), Krueger & Wrolstad (2016) and Brahmana et al. (2020) it is expected that firms with high reputation levels experience a lower systematic risk.

The present study will use the Reputation Quotient (RQ) as the reputation measure. The Reputation Quotient conceptualizes corporate reputation as “a collective construction that describes the aggregated perceptions of various stakeholders about the performance of a company” (Fombrun et al., 2000). This indicator includes items of emotional appeal, financial performance, products and services, social performance, vision and leadership, and finally workplace environment (Fombrun et al., 2000; Ponzi et al., 2011). According to Sarstedt et al. (2013), the Reputation Quotient index is one of the best indicators to measure corporate reputation, being considered by them the preferred measurement approach in terms of criteria validity. Although most studies involving corporate reputation use Fortune Ranking (Brammer & Pavelin, 2006; Fombrun, 1997; Fryxell & Wang, 1994; Veh et al., 2019; Walker, 2010), which is the oldest reputation ranking around the world, several studies indicate that this indicator is not appropriate to measure corporate reputation (Brown & Perry, 1994; Fryxell & Wang, 1994). According to Brown & Perry (1994) and Fryxell & Wang (1994), there is a financial halo underlying the database that appears to be predominantly financial in its construction. This limitation is due to the fact that respondents are "experts", which the analysis focuses only on a group of stakeholders, executives, and financial analysts, and they tend to give more importance to financial aspects (Fryxell & Wang, 1994). The Reputation Quotient (RQ) is the second most used measure in scientific studies (Veh et al., 2019) and suits the research purposes. Additionally, in the sample it is included firms listed in both NYSE and NASDAQ stock exchanges due to the methodology that it is intended to use (which has the inherent use of market data) that also supports the use of this ranking.

Based on the literature review, this work intends to test the following hypotheses:

Hypotheses 1

Firms listed in Reputation Quotient experience higher abnormal returns when compared to those not listed in the same ranking.