Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

When Does Corporate Social Irresponsibility Become News? Evidence from More Than 1,000 Brand Transgressions Across Five Countries

124 views

Published on

Media outlets do not report corporate misconduct, such as environmental offences, corruption, or violations of societal standards around human rights or employee working conditions, consistently and independently. Instead, media are often influenced by their own interests, including advertising revenues paid by offending companies.

Published in: Business
  • Be the first to comment

  • Be the first to like this

When Does Corporate Social Irresponsibility Become News? Evidence from More Than 1,000 Brand Transgressions Across Five Countries

  1. 1. From: Stäbler and Fischer (2020) When Does Corporate Social Irresponsibility Become News? Evidence from More than 1,000 Brand Transgressions Across Five Countries 1
  2. 2. From: Stäbler and Fischer (2020) Nature of Brand Transgressions Studied This study focuses on corporate social irresponsible (CSI) issues Environmental issues Governance issuesSocial issues Violation and endangerment of environmental surroundings • Violation and endangerment of nature • Violation and endangerment of animals / wildlife Violation of compliance with human rights and conditions of employment • Violations of employee relations with respect to discrimination, wages, diversity standards, local working conditions, foreign labor issues • Human rights violations Management misconduct relating to corporate governance or social norms and societal rules • Transparency violations • Consumer fraud with regard to sales practices and pricing policies • Corruption (e.g., bribery, money laundering, tax disputes, breach of trust) Example: BP deep water horizon crisis in 2010 Example: Price fixing scandal of Apple in 2012 Example: Child labor issues at Asos factories in Turkey 2016
  3. 3. From: Stäbler and Fischer (2020) J.P. Morgan accused of fraud Media coverage: 20%* Goldman Sachs accused of fraud Media coverage: 90%* *Note: Reporting media outlets out of 10 leading outlets in the U.S. Impact on brand strength Impact on brand strength 76 78 80 82 84 86 -9 -6 -3 0 3 6 BrandIndex[-100,100] Weeks before and after crisis event 91 93 95 97 99 101 -9 -6 -3 0 3 6 BrandIndex[-100,100] Weeks before and after crisis event -14 -16 -18 -20 -22 -24 1 -1 -3 -5 -7 -9 Two banks are accused of the same wrongdoing but media coverage differs: Why? 2 Higher media coverage of a brand transgression causes more damage to the brand
  4. 4. From: Stäbler and Fischer (2020) What determines what becomes brand transgression news and why it matters? Media coverage drives the stock market reaction to the news 3 News selection variables determine when an event of corporate social irresponsibility (CSI) becomes news
  5. 5. From: Stäbler and Fischer (2020) Effects of key news selection factors - On average, 1 out of 5 outlets cover a CSI event, but only 1 out of 10 cover the story when the involved brand is an advertising partner. - 39% more media cover stories on salient and strong brands. - 80% more media report the event if a foreign brand is involved in a domestic CSI event. - Left oriented media outlets are more likely to report on a CSI event than right oriented media outlets. Stock market reactions - The stock market only reacts to the event if 4 or more U.S. media outlets report on it. - The average financial loss in the U.S. stock market amounts to US$ 321 million. Key insights from analyzing 1,053 CSI events
  6. 6. From: Stäbler and Fischer (2020) Selected news selection variable Likelihood of reporting CSI event Financial impact of news variables Base scenario: 17.3% – 321 million $ Threshold of 4 media reporting (deviations from base case in parentheses). Brand salience ∆ 6.7% Brand strength ∆ 3.5% Domestic CSI event ∆ 7.7% Domestic CSI event  Foreign brand ∆13.9% Evidence-based CSI event ∆ 2.6% Other brand news ∆-2.6% Political orientation ∆-0.7% Advertising relationship ∆-0.9% Selective advertising partnership ∆-7.8% Notes: Increase in news selection variable by 2 standard deviations or set to 1 for respective category. -537m $ (-∆216m $) -435m $ (-∆114m $) -567m $ (-∆246m $) -747m$ (-∆426m $) -233m $ (+∆88m $) ) -297m $ (+∆24m $) -290m $ (+∆31m $) -407m $ (-∆86m $) not meaningful Data from analyzing 1,053 CSI events

×