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Cited by 682Corporate Social Responsibility ReportingCorporate Identity and ReputationRisk Management in Financial Firms

How Media Coverage of Corporate Social Irresponsibility Increases Financial Risk

Kölbel, Julian F., Busch, Timo, Jancso, Leonhardt M.·2017·Strategic Management Journal
DOI 10.1002/smj.2647
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Abstract

Research summary: This article explores the relationship between corporate social irresponsibility ( CSI ) and financial risk. We posit that media coverage of CSI generates risk by providing conditions that increase the potential for stakeholder sanctions. Through analyzing an international panel of 539 firms during 2008–2013, we find that firms receiving higher CSI coverage face higher financial risk. We show that the reach of the reporting media outlet is a critical condition for this relationship. Once the outlet has a high reach, the severity of CSI coverage is a boundary condition that further reinforces the effect. Our findings complement existing theory about the risk‐mitigating effect of corporate social responsibility by illuminating the risk‐generating effect of CSI coverage. For executives, these insights suggest complementary strategies for corporate risk management . Managerial summary: This article examines the effect of negative news on financial risk. It shows that negative media articles regarding environmental, social, and governance ( ESG ) issues increase a firm's credit risk. It also provides a detailed analysis of the impact of an article's reach and severity, i.e., how many readers are exposed to the article and how harshly it criticizes the firm. The results allow to quantitatively assess the risk that emanates from negative ESG news. For executives, three strategies are derived for limiting a firm's exposure to this risk: balancing corporate social responsibility programs with operational safety programs, reporting suboptimal environmental and social performance transparently and proactively, and avoiding acquisition targets and markets with a legacy of negative news . Copyright © 2017 John Wiley & Sons, Ltd.

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Crossref · 10.1002/smj.2647

Cites

7 of 7 references verified0 citation errors · 0 not checkable

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  • The media reinforces the negative repercussions from poor CSR behavior.

    “On the other hand, the media reinforces the negative repercussions from poor CSR behavior (Kölbel et al. 2017).”

    From Mandatory CSR and sustainability reporting: economic analysis and literature review (2021) · cites this paper as Kölbel et al. 2017

  • Credit markets are shown to react negatively when a firm displays or the press uncovers irresponsible CSR behavior and the firm is involved in CSR scandals.

    “Conversely, credit markets are shown to react negatively when a firm displays or the press uncovers irresponsible CSR behavior and the firm is involved in CSR scandals (Kölbel et al. 2017).”

    From Mandatory CSR and sustainability reporting: economic analysis and literature review (2021) · cites this paper as Kölbel et al. 2017

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Authors
Kölbel, J. F., Busch, T., & Jancso, L. M.
Affiliations
  • Department of Management, Technology, and Economics ETH Zurich Zurich Switzerland
  • Universität Hamburg (DE)
  • ETH Zurich (CH)
Corresponding author
Busch, Timo
ORCID
Busch, Timo
Venue
Strategic Management Journal
Publisher
Wiley
Published
2017-03-23
Volume
38
Issue
11
Pages
2266-2284
ISSN
  • 0143-2095 (ISSN-L)
  • 1097-0266
DOI
10.1002/smj.2647
OpenAlex
W2587385549
Cited by
682
References
7
Citations by year
2026: 121 · 2025: 131 · 2024: 113 · 2023: 108 · 2022: 80 · 2021: 56 · 2020: 29 · 2019: 25 · 2018: 12 · 2017: 6 · 2016: 1
FWCI
39.05
Type
journal article
Language
en
Open access
closed
Licence
onlinelibrary.wiley.com/termsAndConditions#vor (vor)
Locations
  • Strategic Management Journal (publishedVersion)
  • Alexandria (UniSG) (University of St.Gallen) (acceptedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • Alexandria (UniSG) (University of St.Gallen) (submittedVersion)
  • Zurich Open Repository and Archive (University of Zurich) (submittedVersion)
Funders
Swiss Commission for Technology and Innovation (13853.1)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Identity and Reputation
  • Social Sciences › Business, Management and Accounting › Accounting › Risk Management in Financial Firms
Keywords
corporate social irresponsibility, media coverage, financial risk, credit risk, ESG news, negative news, media reach, corporate risk management, corporate social responsibility

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