When a sinner does a good deed : the path‐dependence of reputation repair

Haibing SHU, Man Lai WONG

Research output: Journal PublicationsJournal Article (refereed)

2 Citations (Scopus)

Abstract

This study examines how shareholders will interpret a socially desirable action taken by firms with a damaged corporate reputation status. We first explain theoretically why shareholders’ path‐dependent judgments of a tainted firm increase the likelihood of shareholders making less favourable judgments of the firm's socially desirable actions. We then test the theoretical predictions using a sample of Chinese listed firms that were sanctioned for securities fraud and subsequently made donations to the 2008 Sichuan earthquake relief funds. We find that the shareholders evaluate the donations made by fraud‐tainted firms less favourably than those made by firms that have not been sanctioned for fraud. Furthermore, the shareholders’ evaluations of the donations made by fraud‐tainted firms is less favourable if the firms have committed more serious fraud and undertaken fewer positive remedial actions in the post‐fraud period. Overall, our evidence demonstrates that shareholders’ path‐dependent judgments of fraud‐tainted firms constitute a major obstacle that constrains the effectiveness of reputation repair.
Original languageEnglish
Pages (from-to)770-808
Number of pages39
JournalJournal of Management Studies
Volume55
Issue number5
Early online date7 Sep 2017
DOIs
Publication statusPublished - Jul 2018

    Fingerprint

Keywords

  • corporate philanthropic disaster response
  • event study
  • path dependence
  • reputation repair

Cite this