Media exposure on corporate social irresponsibility and firm performance

• Published in: Pacific-Basin finance journal Vol. 68; p. 101604
• Main Authors: Teng, Chia-Chen, Yang, J. Jimmy
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.09.2021
• Subjects: Corporate social irresponsibility; Cumulative abnormal returns; External governance; Media exposure; Corporate social irresponsibility; G34; Cumulative abnormal returns; G3; Media exposure; External governance
• ISSN: 0927-538X; 1879-0585
• DOI: 10.1016/j.pacfin.2021.101604

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. •CSI events trigger significant and negative cumulative abnormal returns.•CSI events have negative impact on the firm's long-term operating performance.•CSI events have negative impact on the firm's reputation and non-operating expenditures.•The number of CSI reports is positively correlated with stock price crash risk.•Media can serve as an external corporate governance mechanism.