Rebuilding a Shattered Reputation: Financial Reporting Quality and Donations Following Corporate Controversies

48 Pages Posted: 21 Nov 2019 Last revised: 10 Apr 2020

Date Written: April 10, 2020

Abstract

We examine the consequences of controversies on corporate reputation and identify two reputation-building strategies that companies are adopting to restore their trust relationships with stakeholders in the aftermath of media condemnation. In particular, we find that in the post-controversy period, firms take a bolstering strategy of reducing their discretionary accruals and endeavour to restore their reputation by engaging more actively in philanthropic activities. Such behaviour coheres with the image repair theory propounded by (Benoit, 1995). While boosting financial reporting quality proves marginally more efficacious than charitable giving, our findings indicate that reputation is easily tarnished, but difficult to rebuild.

Keywords: Controversies; Corporate Reputation; Donations; Reporting Quality

JEL Classification: D22; D64; G32; G41

Suggested Citation

Vasilescu, Camelia and Wisniewski, Tomasz Piotr, Rebuilding a Shattered Reputation: Financial Reporting Quality and Donations Following Corporate Controversies (April 10, 2020). Available at SSRN: https://ssrn.com/abstract=3484818 or http://dx.doi.org/10.2139/ssrn.3484818

Camelia Vasilescu (Contact Author)

School of Business ( email )

University Road
Leicester, LE1 7RH
United Kingdom

Tomasz Piotr Wisniewski

Open University, UK ( email )

Walton Hall
Milton Keynes, Buckinghamshire MK7 6AA
United Kingdom

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