Asset Divestment as a Response to Media Attacks in Stigmatized Industries

Abstract

In stigmatized industries characterized by social contestation, hostile audiences, and distancing between industry insiders and outsiders, firms facing media attacks follow different strategies from firms in uncontested industries. Because firms avoid publicizing their tainted-sector membership, when threatened, they can respond by divesting assets from that industry. Our analyses of the arms industry demonstrate that media attacks on the focal firm and its peers both increase the likelihood of divestment for the focal firm. Specifically, attacks on the focal firm are the most consequential, followed by attacks on peers in the same industry subcategory, and by attacks on peers in different subcategories. These findings shed new light on divestment as a response to media attacks in stigmatized industries and lead us to rethink impression management theory.

Keywords: stigma, impression management, divestment, media, categories, reputation, defense industry

JEL Classification: L6, M10, L14, L60