Rebuilding a Shattered Reputation: Financial Reporting Quality and Donations Following Corporate Controversies
42 Pages Posted: 21 Nov 2019
Date Written: October 1, 2019
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 to boost their financial reporting quality. Furthermore, they endeavour to restore their reputation by engaging more actively in philanthropic activities. Our empirical findings vividly illustrate the importance of reputation and cohere with the image repair theory propounded by (Benoit, 1995).
Keywords: Controversies; Corporate Reputation; Donations; Reporting Quality
JEL Classification: D22; D64; G32; G41
Suggested Citation: Suggested Citation