Corporate Social Responsibility and Media Coverage

Posted: 22 Jan 2016

See all articles by Steven F. Cahan

Steven F. Cahan

University of Auckland Business School

Chen Chen

Monash University - Department of Accounting

Lily Chen

University of Auckland Business School

Nhut H. Nguyen

Auckland University of Technology

Date Written: July 1, 2015

Abstract

In this study, we examine whether firms that act more socially responsible receive more favorable media coverage, and we consider whether firms use CSR to actively manage their media image. We focus on all news stories about a firm, not just those that report on specific CSR initiatives, and find that more socially responsible firms receive more favorable news reportage overall, i.e., they have a more positive media image. These findings are robust after controlling for potential endogeneity. Further, consistent with firms actively managing their media image, we find a stronger relation between CSR and media favorability when incentives to improve a firm’s media image are high, e.g., among firms in sin industries, during periods of low investor sentiment, and prior to seasoned equity offerings. Finally, we find that for firms that demonstrate superior social responsibility and receive more favorable news reporting, there is a significant interaction between social responsibility and media favorability that increases (decreases) a firm’s equity valuation (cost of capital). Our results are consistent with the media slanting their reporting in favor of good performing CSR firms. Overall, we contribute to the literature by showing that firms can influence their media coverage through a relatively subtle channel, CSR performance.

Keywords: Media management; Corporate social responsibility; Business press

JEL Classification: G10; L82; M14

Suggested Citation

Cahan, Steven F. and Chen, Chen and Chen, Lily and Nguyen, Nhut H., Corporate Social Responsibility and Media Coverage (July 1, 2015). Journal of Banking and Finance, Vol. 59, 2015, Available at SSRN: https://ssrn.com/abstract=2720049

Steven F. Cahan (Contact Author)

University of Auckland Business School ( email )

Faculty of Business & Economics
Private Bag 92019
Auckland
New Zealand

Chen Chen

Monash University - Department of Accounting ( email )

Building H, Level 3
Caulfield campus
Melbourne, Victoria 3800
Australia

Lily Chen

University of Auckland Business School ( email )

Private Bag 92019
Auckland 1001
New Zealand

Nhut H. Nguyen

Auckland University of Technology ( email )

55 Wellesley St East
Auckland, Auckland 1010
New Zealand
+64 9 921 9999 (Phone)

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