Abstract
Does corporate reputation buffer firms from reputational spillovers, or can it backfire when controversies arise? This study examines how corporate reputation shapes the market-valuation consequences of suppliers’ human-rights controversies, recognizing that shareholders may hold focal firms accountable for upstream misconduct. Using an international panel of RepTrak® Pulse firms from 2011 to 2023, we show that supplier-related human-rights controversies are associated with lower market valuation and that corporate reputation amplifies this negative association, consistent with a reputational “boomerang” effect. We further theorize and test firm visibility as a boundary condition: the reputational burden is stronger when the focal firm receives higher media coverage, reflecting greater public visibility and stakeholder attention. We estimate interaction-based dynamic panel models using two-step System GMM to address endogeneity and complement coefficient estimates with marginal-effects analyses to facilitate interpretation of conditional relationships. Robustness checks using market-to-book yield qualitatively similar inferences. The findings suggest that highly reputed and highly visible firms need supply-chain governance mechanisms that can anticipate, detect, and respond to upstream human-rights controversies.