Why Bad News Can Be Good News: The Signaling Feedback Effect of Negative Media Coverage of Corporate Irresponsibility. (March 2023)

• Record Type: Journal Article
• Authors: Fu, Limin
• Other Names: Hahn Rüdiger guest-editor.; Reimsbach Daniel guest-editor.; Wickert Christopher guest-editor.
• Is Part Of: Organization & environment. Volume 36:Number 1(2023)
• Page Start: 98
• Page End: 125
• Publication Date: 2023-03
• Subjects: corporate social performance (CSP) -- corporate social responsibility (CSR), innovation search -- nonfinancial disclosure -- R&D -- signaling theory; Associations, institutions, etc -- Environmental aspects -- Periodicals; Business enterprises -- Environmental aspects -- Periodicals; Environmental management -- Periodicals; Environmental responsibility -- Periodicals; Sustainability -- Periodicals; 658.408305
• DOI: 10.1177/10860266221108704
• Languages: English
• ISSNs: 1086-0266

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.