Exploring the Link between Corporate Reputation with Sustainability Leadership and Market Valuation: A Comparative Analysis of Award and Non-Award Companies in PSX

Abstract

This literature investigated the impact of corporate reputation on companies’ performance and their market valuation in the Pakistan stock market. We attempted to explore whether companies with a high reputation for sustainability also perform better in the Pakistan stock market. Verifying signaling theory and asset-based theories on the Pakistani market, we explained why associations signal their promise to practicality to influence the outer point of view on reputation. A company's standing for being focused on supportability is a theoretical asset that can expand the estimation of an association's normal cash flows or potentially lessen the inconstancy of its cash flows. For finding out the companies with a reputation with sustainability, we used the PSX criteria of the award list. Data was taken from 2014 to 2018 (five years) from the award list announced by Pakistan stock exchange limited. We classify a company as an award company if it continuously got included in the PSX award list in a specified period of four out of five times. Similarly, a non-award company was classified as an accompanying with the same market capitalization as Award Company but not included in the list. In this way, 12 awards and 24 non-award companies were shortlisted. We also include 12 non-award companies of the same sector and market capitalization for sector analysis between reputation and non-reputation. Comparative analysis was carried out through 1-way ANOVA and factor affecting and market valuation of the two groups were explored using regression analysis. These factors included net income (NI), book value of equity (BV), Size, ROE, ROA, and Leverage (LEV) represented by debt ratio. According to expectation, our results of t-test suggested that the mean of all variables for award and non-award companies are significantly different and the mean of award companies are higher than their counter part. One way Anova consequences of sectorial examination demonstrated that concerning net gain, there is huge contrast between the methods for trustworthy organizations and non-respectable organizations in seven out of nine areas. Regression Analysis prove our equation that independent variable has significant impact on dependent variable. Our findings showed that the overall firms with incredible sustainability reputation and managed to name on award list of our sample year has greater valuation by the market when stood out from their counterparty (non-award companies). Hence, our results imply that organizations have to focus on their reputation for corporate sustainability which in turn improve their financial position and enhance their market valuation.