Why bad news can be good news: the signaling feedback effect of negative media coverage of corporate irresponsibility

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6 Citations (Scopus)

Abstract

Can bad news also be good news? In this study, I explicate why bad news about firms’ corporate social irresponsibility (CSiR) can be good news for firms. Specifically, I address the role of negative media coverage of CSiR in firms’ corporate social performance (CSP). Drawing on signaling theory, I propose that negative media coverage of CSiR is a form of costly yet effective external feedback to firms’ current social signaling. It, therefore, propels firms to undertake organizational changes to send positive response signals through improved CSP. Furthermore, I argue that this effect is augmented by organizational innovation search, which influences firms’ learning capacity required to improve firms’ CSP. Using a multicountry sample of 1,049 firms between 2007 and 2016, I find that negative media coverage of CSiR induces firms to enhance CSP, and this effect is moderated by organizational innovation search.

Original languageEnglish
Pages (from-to)98-125
Number of pages28
JournalOrganization and Environment
Volume36
Issue number1
DOIs
Publication statusPublished - Mar 2023
Externally publishedYes

Keywords

  • corporate social performance (CSP)
  • corporate social responsibility (CSR), innovation search
  • nonfinancial disclosure
  • R&D
  • signaling theory

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