Do credible firms perform better in emerging markets? Evidence from China
Abstract
Prior research suggests that corporate credibility is associated with firm financial performance in developed countries. This article examines whether corporate credibility is related to firm performance using Economic Observer's rating of corporate credibility in China, the largest emerging market in the world. Based on a fourstage valuation model, we find that more reputable and credible firms outperform those with low ratings by almost 20% in 3-year stock returns and have better 3-year net profit margins, return on equity, and sales growth. This study is the first to directly examine the relationship between corporate credibility and firm performance in emerging markets such as China, and our results confirm that firms with high credibility exhibit better financial and market performance at least in the following 3 years. © Springer 2009.
Publication Title
Journal of Business Ethics
Recommended Citation
Zhang, R., & Rezaee, Z. (2009). Do credible firms perform better in emerging markets? Evidence from China. Journal of Business Ethics, 90 (2), 221-237. https://doi.org/10.1007/s10551-009-0038-8
