Effects of Corporate Reputation on the Cost of Equity Capital

Corporate reputation is a representation of users' assessment of a company's actions, and these actions can increase reputational capital and reduce the risks inherent in the activity. Therefore, the aim of this study is to verify whether corporate reputation contributes to a lower cost of equity for Brazilian listed companies. As corporate reputation is a set of perceptions from different stakeholders, we used the Corporate Sustainability Index to capture the perceptions of investors, environmental agents, independent auditors and public purpose organizations; the ranking of the magazine As Melhores da Dinheiro to capture the perceptions of market analysts, and the Social Disclosure Index, prepared by Gonçalves, De Medeiros and Gonçalves (2012), to capture the perceptions of investors and external users. As for the cost of equity, the model used was the Gordon model. To this end, 56 companies on the Ibovespa were analyzed from 2008 to 2012.