Contagious corporate reputation risk: Uncovering the pandemic's impact

•Firms' reputation risk index (RRI) co-move with their industry and local peers.•The RRI co-movement with local peers is weaker during the COVID-19 period.•The local-peer co-movement declines more in democratic states.•The local-peer co-movement declines more in states with higher pandemic death rates. Firms' Reputation Risk Index (RRI) co-move with their industry and local peers in the US market, suggesting that managers follow their industry and local peers to conduct ESG-related irresponsible activities. Moreover, the RRI co-movement with local peers is attenuated during the COVID-19 pandemic period, and the reduction is more significant in democratic states with stringent social distancing policies and in states with higher pandemic mortality rates. In contrast, the industry-level RRI co-movement is not significantly affected during the pandemic period. Our findings suggest that social interactions among local managers may be an essential driver for the regional RRI co-movement before the pandemic.