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Media exposure on corporate social irresponsibility and firm performance

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  • Teng, Chia-Chen
  • Yang, J. Jimmy

Abstract

This study investigates the impact of media exposure of corporate social irresponsibility (CSI) events on firm performances. Using unique data from an emerging market, we find that CSI events trigger significant and negative cumulative abnormal returns (CARs). Negative CARs are more profound for environment and safety issues as well as illegal violations. The existence of CSI events has negative impact on the subject firm's long-term operating and financial performances due to reputation damage and extra costs for regulatory compliance and rebuilding reputation. Furthermore, the number of CSI reports is negatively associated with firm performance and positively correlated with stock price crash risk. The negative effect is more profound for CSI events reported by the media than those self-reported by subject firms due to regulations. Our findings support the conjecture that media can serve as an external corporate governance mechanism, especially in emerging markets where well established governance structure is not yet available.

Suggested Citation

  • Teng, Chia-Chen & Yang, J. Jimmy, 2021. "Media exposure on corporate social irresponsibility and firm performance," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x21001116
    DOI: 10.1016/j.pacfin.2021.101604
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    More about this item

    Keywords

    Corporate social irresponsibility; Media exposure; Cumulative abnormal returns; External governance;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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