How is reputation management by regulatory agencies related to their employees' reputational perception?

Existing research investigating regulatory agencies' reputation‐conscious behavior have primarily focused on reactive behavior in the context of reputational threats. Additionally, this literature has primarily focused on agencies' responses to such threats and external audiences' perceptions of agencies reputation, although reputation resides in both external and internal audiences. This study aims to address these two gaps by (1) identifying the relevance of regulatory agencies' reputations vis‐à‐vis internal audiences and (2) investigating whether reputations, in this case as judged by internal audiences, can be cultivated when managers of regulatory agencies perform reputation management in a more proactive sense. Using a unique two‐wave panel survey targeting internal audiences from three Danish regulatory agencies, we find a positive and significant relationship between reputation management and how internal audiences perceive the organizational reputation. Moreover, we find that employee advocacy partially mediates this relationship. Given that regulatory agencies are particularly susceptible to reputational threats and given that the reputational perception of employees affect other employee outcomes as well as their regulatory decision making, this study shows the potential of reputation management by regulatory agencies as an instrument for affecting employees' outcomes.