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

42 Pages Posted: 21 Nov 2019

Date Written: October 1, 2019

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 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

Vasilescu, Camelia and Wisniewski, Tomasz Piotr, Rebuilding a Shattered Reputation: Financial Reporting Quality and Donations Following Corporate Controversies (October 1, 2019). 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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