DETERMINANTS OF AUDITORS REPUTATION IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1. Background of the study
Corporate reputation acts the way in which various stakeholders behave towards an organization, influencing, for example employee
retention, customer satisfaction and customer loyalty. Not surprisingly, CEOs see corporate reputation as a valuable intangible asset(Institute of Directors 1999). A favorable reputation encourages shareholders to invest in a company; it attracts good sta,retains customers (Markham 1972) and correlates with superior overall returns (Robert and Dowling 1997; Vergin and Qoronfleh 1998). However,many of these claims have been challenged as being anecdotal or b studies. Corporate reputation is still relatively new as an academic subject. It is becoming a paradigm in its own right, a coherent way of
looking at organizations and business performance, but it is still dogged by its origins in a number of separate disciplines.
The reputation mechanism or “reputation eect”
refers to the fact that reputation concerns may aect
players actions (Weigelt and
Camerer 1988). Analytical research demonstrates that the reputation eect
may help to reduce agency problems and empirical evidence
reveals that reputation concerns aect
the behaviour or financial analysis, investment banks, directors, and auditors, motivating these
professionals to take actions that provide long-term benefits rather than focusing (exclusively) on actions that favour short-term interest.
Recent research addresses the eect
of corporate reputation on stakeholder perceptions and links those perceptions to valuation (Filbeck
and Preece 2003; Anderson and Smith). Research also addresses the relation between corporate reputation and company’s debt and
equity financing activities and costs (Diamond 1991; Siegel 2005). Despite this increasing interest in corporate reputation and the growing
body of reputation-related research, we known of no prior research directly addressing the association between corporate reputation and
financial reporting quality.
1.2 Statement of Research Problems
Confusion over definition adds to confusion over measurement methods in the reputation literature. A number of measurement
approaches are available reflecting the number of possible strategies towards measuring corporate reputation. Respondents can be asked
to rate the reputation of a firm from poor to good (Goldberg and Hartwick 1990).
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