Journal of Business Ethics

, Volume 129, Issue 1, pp 93–114 | Cite as

News Visibility and Corporate Philanthropic Response: Evidence from Privately Owned Chinese Firms Following the Wenchuan Earthquake

Article

Abstract

Considerable interest exists regarding the media’s influence on corporate reactions, but the link between media visibility and corporate philanthropic response (CPR) is not clear. Natural disasters thus provide an environment that makes visible the general processes relevant to that link. Based on agenda-setting theory, stakeholder theory, and impression-management theory, we propose that corporations that are highly visible in the news media are more likely to engage in CPR and donate more money. We also propose that companies with reputations for irresponsibility or vulnerability strengthen that tendency. Data from Chinese firms after the Wenchuan earthquake on May 12, 2008, and the corresponding empirical results support our hypotheses. This study also shows that CPR is an active conduit for deflecting undesired reputations.

Keywords

News visibility Corporate philanthropy Natural disaster Impression management Corporate image of irresponsibility Corporate image of vulnerability 

References

  1. Aiken, L. S., & West, S. G. (1991). Multiple regressions: Testing and interpreting interaction. Thousand Oaks, CA: Sage.Google Scholar
  2. Allen, F., Qian, J., & Qian, M. (2005). Law, finance, and economic growth in China. Journal of Finance, 77(1), 57–116.Google Scholar
  3. Balmas, M., & Sheafer, T. (2010). Candidate image in election campaigns: Attribute agenda setting, affective priming, and voting intentions. International Journal of Public Opinion Research, 22(2), 204–229.CrossRefGoogle Scholar
  4. Bansal, P., & Clelland, I. (2004). Talking trash: Legitimacy, impression management, and unsystematic risk in the context of the natural environment. Academy of Management Journal, 47(1), 93–103.Google Scholar
  5. Barber, B. M., & Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. Review of Financial Studies, 21(2), 785–818.CrossRefGoogle Scholar
  6. Barnett, M. L., & King, A. A. (2008). Good fences make good neighbors: A longitudinal analysis of an industry self-regulatory institution. Academy of Management Journal, 51(6), 1150–1170.Google Scholar
  7. Bednar, M. K. (2012). Watchdog or lapdog? A behavioral view of the media as a corporate governance mechanism. Academy of Management Journal, 55(1), 131–150.Google Scholar
  8. Berkman, H., Cole, R. A., & Fu, L. J. (2010). Political connections and minority-shareholder protection: Evidence from securities-market regulation in China. Journal of Financial and Quantitative Analysis, 45(6), 1391–1417.CrossRefGoogle Scholar
  9. Bolino, M., Kacmar, K., Turnley, W., & Gilstrap, J. B. (2008). A multi-level review of impression management motives and behaviors. Journal of Management, 34(6), 1080–1109.CrossRefGoogle Scholar
  10. Brammer, S., & Millington, A. (2006). Firm size, organizational visibility and corporate philanthropy: An empirical analysis. Business Ethics: A European Review, 15(1), 6–18.Google Scholar
  11. Brounrn, D., & Derwall, J. (2010). The impact of terrorist attacks on international stock markets. European Financial Management, 16(4), 585–595.CrossRefGoogle Scholar
  12. Brown, A. D. (1997). Narcissism, identity, and legitimacy. Academy of Management Review, 22(3), 643–686.Google Scholar
  13. Brown, W., Helland, E., & Smith, J. K. (2006). Corporate philanthropic practices. Journal of Corporate Finance, 12(5), 855–877.CrossRefGoogle Scholar
  14. Bushee, B. J., Core, J. E., Guay, W., & Hamm, S. J. W. (2010). The role of business press as an information intermediary. Journal of Accounting Research, 48(1), 1–19.CrossRefGoogle Scholar
  15. Calomiris, C. W., Fisman, R., & Wang, Y. (2010). Profiting from government stakes in a command economy: Evidence from Chinese asset sales. Journal of Financial Economics, 96(3), 399–412.CrossRefGoogle Scholar
  16. Campbell, D., & Slack, R. (2006). Public visibility as a determinant of the rate of corporate charitable donations. Business Ethics: A European Review, 15(1), 19–28.Google Scholar
  17. Carretta, A., Farina, V., Martelli, D., Fiordelisi, F., & Schwizer, P. (2011). The impact of corporate governance press news on stock market returns. European Financial Management, 17(1), 100–119.CrossRefGoogle Scholar
  18. Carroll, C. E., & McCombs, M. (2003). Agenda-setting effects of business news on the public’s images and opinions about major corporations. Corporate Reputation Review, 6(1), 36–46.CrossRefGoogle Scholar
  19. Carter, D., & Simkins, B. (2004). The market’s reaction to unexpected, catastrophic events: The case of airline stock returns and the September 11th attacks. Quarterly Review of Economics and Finance, 44(4), 539–558.Google Scholar
  20. Chen, C. C., & Meindl, J. R. (1991). The construction of images in the popular press. Administrative Science Quarterly, 36(4), 521–551.CrossRefGoogle Scholar
  21. Chiu, S., & Sharfman, M. (2011). Legitimacy, visibility and the antecedents of corporate social performance: An investigation of the instrumental perspective. Journal of Management, 37(6), 1558–1585.CrossRefGoogle Scholar
  22. Core, J. E., Guay, W., & Larcker, D. F. (2008). The power of the pen and executive compensation. Journal of Financial Economics, 88(1), 1–25.CrossRefGoogle Scholar
  23. Crampton, W., & Patten, D. (2008). Social responsiveness, profitability and catastrophic events: Evidence on the corporate philanthropic response to 9/11. Journal of Business Ethics, 81(4), 863–873.CrossRefGoogle Scholar
  24. Donaldson, T., & Preston, L. (1995). The stakeholder theory of corporation: concepts, evidence, and implications. Academy of Management Review, 20(1), 65–91.Google Scholar
  25. Dyck, A., Volchkova, N., & Zingales, L. (2008). The corporate governance role of the media: Evidence from Russia. Journal of Finance, 63(3), 1093–1135.Google Scholar
  26. Elsbach, K. D. (1994). Managing organizational legitimacy in the California cattle industry: The construction and effectiveness of verbal accounts. Administrative Science Quarterly, 39, 57–88.CrossRefGoogle Scholar
  27. Elsbach, K. D., Sutton, R. I., & Principe, K. E. (1998). Averting expected challenges through anticipatory impression management: A study of hospital billing. Organization Science, 9(1), 68–86.CrossRefGoogle Scholar
  28. Engelberg, J., & Parsons, C. (2011). The causal impact of media in financial markets. Journal of Finance, 66(1), 67–97.Google Scholar
  29. Faccio, M. (2007). Politically connected firms. American Economic Review, 96(1), 369–386.Google Scholar
  30. Fan, G., & Wang, X. (2006). The report on the relative process of marketization of each region in China. Beijing: The Economic Science Press (in Chinese).Google Scholar
  31. Fan, J., Wong, P. H., & Zhang, T. J. (2007). Politically connected CEOs, corporate governance and post-IPO performance of China’s newly partially privatized firms. Journal of Financial Economics, 84(2), 330–357.CrossRefGoogle Scholar
  32. Fang, L., & Peress, J. (2009). Media coverage and cross-section of stock returns. Journal of Finance, 337(5), 2023–2052.Google Scholar
  33. Godfrey, P. (2005). The relationship between corporate philanthropy and shareholder wealth: A risk management perspective. Academy of Management Review, 30(4), 777–798.Google Scholar
  34. Gordon, T. P., Knock, C. L., & Neely, D. G. (2009). The role of rating agencies in the market for charitable contributions: An empirical test. Journal of Accounting and Public Policy, 28(6), 469–484.CrossRefGoogle Scholar
  35. Govekar, M., Govekar, P., & Rishi, M. (2002). The effect of macroeconomic shocks on local corporate philanthropy. Journal of Economics and Politics, 15(1), 15–26.Google Scholar
  36. Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391–430.CrossRefGoogle Scholar
  37. Highhouse, S., Brooks, M. E., & Gregarus, G. (2009). An organizational impression management perspective on the formation of corporate reputations. Journal of Management, 35(6), 1481–1493.CrossRefGoogle Scholar
  38. Iyengar, S. (1990). The accessibility bias in politics: Television news and public opinion. International Journal of Public Opinion Research, 2(1), 1–15.CrossRefGoogle Scholar
  39. Jia, M., & Zhang, Z. (2011). Agency costs and corporate philanthropic disaster response: The moderating role of women on two-tier boards—Evidence from People’s Republic of China. International Journal of Human Resource Management, 22(9), 2011–2031.Google Scholar
  40. Jia, M., & Zhang, Z. (2013). The CEO’s representation of demands and the corporations’ response to external pressures: Do politically affiliated firms donate more? Management and Organization Review, 9(1), 87–114.CrossRefGoogle Scholar
  41. La Porta, R., Lopez-De-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54(2), 471–517.Google Scholar
  42. Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48(2), 268–305.CrossRefGoogle Scholar
  43. Mattingly, J. E., & Berman, S. L. (2006). Measurement of corporate social action: Discovering taxonomy in the Kinder Lydenberg Domini ratings data. Business and Society, 45(1), 20–46.Google Scholar
  44. McCombs, M. E., & Shaw, D. L. (1972). The agenda-setting function of mass media. Public Opinion Quarterly, 36(2), 176–187.CrossRefGoogle Scholar
  45. McGuire, J., Dow, S., & Argheyd, K. (2003). CEO incentives and corporate social performance. Journal of Business Ethics, 45(4), 341–359.CrossRefGoogle Scholar
  46. McWilliams, A., & Siegel, D. (1997). Event studies in management research: Theoretical and empirical issues. Academy of Management Journal, 40(3), 626–657.Google Scholar
  47. Miller, G. S. (2006). The press as a watchdog for accounting fraud. Journal of Accounting Research, 44(5), 1001–1033.CrossRefGoogle Scholar
  48. Miller, G., & Shanthikumar, D. (2011). Geographic location, media coverage and investor reactions. Working paper, University of Michigan.Google Scholar
  49. Mishina, Y., Dycks, B. J., & Block, E. S. (2010). Why “good” firms do bad things: The effects of high aspirations, high expectations, and prominence on the incidence of corporate illegality. Academy of Management Journal, 53(4), 701–722.Google Scholar
  50. Moon, J., & Shen, X. (2010). CSR in China research: Salience, focus and nature. Journal of Business Ethics, 94(4), 613–629.CrossRefGoogle Scholar
  51. Muller, A., & Kräussl, R. (2011). Doing good deeds in times of need: A strategic perspective on corporate disaster donations. Strategic Management Journal, 32(9), 911–929.CrossRefGoogle Scholar
  52. Muller, A., & Whiteman, G. (2009). Exploring the geography of corporate philanthropic disaster response: A study of fortune global 500 firms. Journal of Business Ethics, 84(4), 589–603.CrossRefGoogle Scholar
  53. Niederhoffer, V. (1971). The analysis of world events and stock prices. Journal of Business, 44(1), 193–219.Google Scholar
  54. Nikkinen, J., & Vähämaa, S. (2010). Terrorism and stock market sentiment. Financial Review, 45(2), 263–275.CrossRefGoogle Scholar
  55. Patten, D. M. (2008). Does the market value corporate philanthropy? Evidence from the response to the 2004 tsunami relief report. Journal of Business Ethics, 81(3), 599–607.CrossRefGoogle Scholar
  56. Pfarrer, M. D., Pollock, T. G., & Rindova, V. P. (2010). A tale of two assets: The effects of firm reputation and celebrity on earnings surprises and investors’ reactions. Academy of Management Journal, 53(5), 1131–1152.Google Scholar
  57. Pollock, T. G., & Rindova, V. P. (2003). Media legitimation effects in the market for initial public offerings. Academy of Management Journal, 46(5), 631–642.Google Scholar
  58. Rao, H., Greve, H., & Davis, G. (2001). Fool’s gold: Social proof in the initiation and abandonment of coverage by Wall Street analysts. Administrative Science Quarterly, 46(3), 502–526.CrossRefGoogle Scholar
  59. Rindova, V. P., Pollock, T. G., & Hayward, M. L. A. (2006). Celebrity firms: The social construction of market popularity. Academy of Management Review, 31(1), 50–71.Google Scholar
  60. Ryan, T. Y. (1997). Modern regression analysis. New York: Wiley.Google Scholar
  61. Saiia, D. H., Carroll, A. B., & Buchholtz, A. K. (2003). Philanthropy as strategy when corporate charity “begins at home”. Business and Society, 42(2), 169–201.Google Scholar
  62. Sharfman, M. (1994). Changing institutional rules: The evolution of corporate philanthropy, 1883–1953. Business and Society, 33(2), 236–269.Google Scholar
  63. Strike, V. M., Gao, J., & Bansal, P. (2006). Being good while being bad: Social responsibility and the international diversification of US firms. Journal of International Business Studies, 37, 850–862.CrossRefGoogle Scholar
  64. Tetlock, P. C. (2007). Giving content to investor sentiment: The role of media in the stock market. Journal of Finance, 62(3), 1139–1168.Google Scholar
  65. Tetlock, P. C., Saar-Tsechansky, M., & Macskassy, S. (2008). More than words: Quantifying language to measure firms’ fundamentals. Journal of Finance, 63(3), 1437–1467.Google Scholar
  66. Ting, Y. (2007). Natural disasters in China. Advances in Natural and Technological Hazards Research, 21, 181–192.Google Scholar
  67. Turnley, W. H., & Bolino, M. C. (2001). Achieving desired images while avoiding undesired images: Exploring the role of self-monitoring in impression management. Journal of Applied Psychology, 86(2), 351–360.CrossRefGoogle Scholar
  68. Wang, Z. (2008). A preliminary report on the great Wenchuan earthquake. Earthquake engineering and engineering vibration, 7(2), 225–234.CrossRefGoogle Scholar
  69. Wang, H., & Qian, C. (2011). Corporate philanthropy and corporate financial performance: The role of stakeholder response and political access. Academy of Management Journal, 54(6), 115–1181.Google Scholar
  70. Williams, R. J., & Barrett, J. D. (2000). Corporate philanthropy, criminal activity, and firm reputation: Is there a link? Journal of Business Ethics, 26(4), 341–350.CrossRefGoogle Scholar
  71. Zhang, R., Rezaee, Z., & Zhu, J. (2009). Corporate philanthropic disaster response and ownership type: Evidence from Chinese firms’ response to the Sichuan earthquake. Journal of Business Ethics, 91(1), 51–63.CrossRefGoogle Scholar
  72. Zhang, R., Zhu, J., Yue, H., & Zhu, C. (2010). Corporate philanthropic giving, advertising intensity, and industry competition level. Journal of Business Ethics, 94(1), 39–52.CrossRefGoogle Scholar
  73. Zyglidopoulos, S., Georgiadis, A., Carroll, C., & Siegel, D. (2012). Does media attention drive corporate social responsibility? Journal of Business Research, 65(11), 1622–1627.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  1. 1.School of ManagementNorthwestern Polytechnical UniversityXi’anChina
  2. 2.School of ManagementXi’an Jiaotong UniversityXi’anChina

Personalised recommendations