Media coverage of corporate wrongdoing: International evidence on the stock market reaction and the buffering effect of prior corporate social performance

Using an international sample of 111,251 news published in print, online, and social media between 2007 and 2021 covering 3202 firms in 20 countries, I find that superior prior corporate social performance (CSP) buffers the adverse market reaction to media coverage of corporate social irresponsibility (CSI), indicating that stakeholders interpret the misbehaviour as an anomaly rather than a pattern. Generally, the magnitude of the negative market reaction to CSI news intensified over time, confirming increased social awareness of corporate responsibility. I complement existing literature by revealing a diminishing marginal benefit of prior CSP: the buffering effect is consistently positive while strongly flattening, suggesting that stakeholders are somewhat indifferent between good and excellent CSP but highly sensitive towards previous misbehaviour. The shareholder value loss and insurance‐like effect of prior CSP are enhanced for firms located in stakeholder‐oriented business cultures, indicating that societal culture shapes stakeholders' attitudes towards corporate responsibility.