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Governance, reputation, crises and recovery: An experiment

Author

Listed:
  • Noe, Thomas H.
  • Rebello, Michael J.
  • Rietz, Thomas A.

Abstract

We model and experimentally test the relationship between a firm’s reputation and its governance when firms can repair reputation damage through reform. Our model shows that conditions for establishing a reputation depend on whether control of firm operations is delegated to professional managers. Moreover, although the option to reform always dilutes firms’ incentive to commit to reputable behavior, delegation ameliorates the dilution. We assess the robustness of our model to behavioral deviations from optimal behavior through a laboratory experiment. The results of this experiment are directionally consistent with the model’s predictions.

Suggested Citation

  • Noe, Thomas H. & Rebello, Michael J. & Rietz, Thomas A., 2026. "Governance, reputation, crises and recovery: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 248(C).
    • Handle: RePEc:eee:jeborg:v:248:y:2026:i:c:s0167268126002738
    DOI: 10.1016/j.jebo.2026.107686
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    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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