REPUTATION AND FINANCIAL PERFORMANCES OF A COMPANY

Abstract

As a kind of intangible asset, reputation allows the company to manage the expectations and needs of its stakeholders. It is just another tool in the efforts of each company to survive and improve its competitive position. This asset is difficult to acquire, and its formation usually requires high quality products  over several years, solid financial results, constant innovation activity, responsiveness to the stakeholder demands, permanent technological advancement, high business success, etc. Reputation is a resource which cannot be imitated, and its strategic relevance in the resource portfolio is growing, because it can create differentiation and barriers in relation to competitors. The purpose of this paper is to examine the interdependence of reputation, as intangible resource of the company, and its financial performances. Two research questions are highlighted in this paper: whether actual financial performances affect the company's reputation and whether created reputation affects the financial performances of the company. The answers to these questions are given on the basis of empirical evidences of many studies realized in the previous period. The results of this paper will inevitably reveal significant interdependence, more precisely, the interplay of reputation and financial performances of the company. The contributions of the study are useful to managers in order not to forget the importance of a good reputation for superior financial performances, and also to direct more resources, time and efforts to the process of making a good reputation of their companies.