Abstract
Considerable interest exists regarding the media’s influence on corporate reactions, but the link between media visibility and corporate philanthropic response (CPR) is not clear. Natural disasters thus provide an environment that makes visible the general processes relevant to that link. Based on agenda-setting theory, stakeholder theory, and impression-management theory, we propose that corporations that are highly visible in the news media are more likely to engage in CPR and donate more money. We also propose that companies with reputations for irresponsibility or vulnerability strengthen that tendency. Data from Chinese firms after the Wenchuan earthquake on May 12, 2008, and the corresponding empirical results support our hypotheses. This study also shows that CPR is an active conduit for deflecting undesired reputations.
Similar content being viewed by others
References
Aiken, L. S., & West, S. G. (1991). Multiple regressions: Testing and interpreting interaction. Thousand Oaks, CA: Sage.
Allen, F., Qian, J., & Qian, M. (2005). Law, finance, and economic growth in China. Journal of Finance, 77(1), 57–116.
Balmas, M., & Sheafer, T. (2010). Candidate image in election campaigns: Attribute agenda setting, affective priming, and voting intentions. International Journal of Public Opinion Research, 22(2), 204–229.
Bansal, P., & Clelland, I. (2004). Talking trash: Legitimacy, impression management, and unsystematic risk in the context of the natural environment. Academy of Management Journal, 47(1), 93–103.
Barber, B. M., & Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. Review of Financial Studies, 21(2), 785–818.
Barnett, M. L., & King, A. A. (2008). Good fences make good neighbors: A longitudinal analysis of an industry self-regulatory institution. Academy of Management Journal, 51(6), 1150–1170.
Bednar, M. K. (2012). Watchdog or lapdog? A behavioral view of the media as a corporate governance mechanism. Academy of Management Journal, 55(1), 131–150.
Berkman, H., Cole, R. A., & Fu, L. J. (2010). Political connections and minority-shareholder protection: Evidence from securities-market regulation in China. Journal of Financial and Quantitative Analysis, 45(6), 1391–1417.
Bolino, M., Kacmar, K., Turnley, W., & Gilstrap, J. B. (2008). A multi-level review of impression management motives and behaviors. Journal of Management, 34(6), 1080–1109.
Brammer, S., & Millington, A. (2006). Firm size, organizational visibility and corporate philanthropy: An empirical analysis. Business Ethics: A European Review, 15(1), 6–18.
Brounrn, D., & Derwall, J. (2010). The impact of terrorist attacks on international stock markets. European Financial Management, 16(4), 585–595.
Brown, A. D. (1997). Narcissism, identity, and legitimacy. Academy of Management Review, 22(3), 643–686.
Brown, W., Helland, E., & Smith, J. K. (2006). Corporate philanthropic practices. Journal of Corporate Finance, 12(5), 855–877.
Bushee, B. J., Core, J. E., Guay, W., & Hamm, S. J. W. (2010). The role of business press as an information intermediary. Journal of Accounting Research, 48(1), 1–19.
Calomiris, C. W., Fisman, R., & Wang, Y. (2010). Profiting from government stakes in a command economy: Evidence from Chinese asset sales. Journal of Financial Economics, 96(3), 399–412.
Campbell, D., & Slack, R. (2006). Public visibility as a determinant of the rate of corporate charitable donations. Business Ethics: A European Review, 15(1), 19–28.
Carretta, A., Farina, V., Martelli, D., Fiordelisi, F., & Schwizer, P. (2011). The impact of corporate governance press news on stock market returns. European Financial Management, 17(1), 100–119.
Carroll, C. E., & McCombs, M. (2003). Agenda-setting effects of business news on the public’s images and opinions about major corporations. Corporate Reputation Review, 6(1), 36–46.
Carter, D., & Simkins, B. (2004). The market’s reaction to unexpected, catastrophic events: The case of airline stock returns and the September 11th attacks. Quarterly Review of Economics and Finance, 44(4), 539–558.
Chen, C. C., & Meindl, J. R. (1991). The construction of images in the popular press. Administrative Science Quarterly, 36(4), 521–551.
Chiu, S., & Sharfman, M. (2011). Legitimacy, visibility and the antecedents of corporate social performance: An investigation of the instrumental perspective. Journal of Management, 37(6), 1558–1585.
Core, J. E., Guay, W., & Larcker, D. F. (2008). The power of the pen and executive compensation. Journal of Financial Economics, 88(1), 1–25.
Crampton, W., & Patten, D. (2008). Social responsiveness, profitability and catastrophic events: Evidence on the corporate philanthropic response to 9/11. Journal of Business Ethics, 81(4), 863–873.
Donaldson, T., & Preston, L. (1995). The stakeholder theory of corporation: concepts, evidence, and implications. Academy of Management Review, 20(1), 65–91.
Dyck, A., Volchkova, N., & Zingales, L. (2008). The corporate governance role of the media: Evidence from Russia. Journal of Finance, 63(3), 1093–1135.
Elsbach, K. D. (1994). Managing organizational legitimacy in the California cattle industry: The construction and effectiveness of verbal accounts. Administrative Science Quarterly, 39, 57–88.
Elsbach, K. D., Sutton, R. I., & Principe, K. E. (1998). Averting expected challenges through anticipatory impression management: A study of hospital billing. Organization Science, 9(1), 68–86.
Engelberg, J., & Parsons, C. (2011). The causal impact of media in financial markets. Journal of Finance, 66(1), 67–97.
Faccio, M. (2007). Politically connected firms. American Economic Review, 96(1), 369–386.
Fan, G., & Wang, X. (2006). The report on the relative process of marketization of each region in China. Beijing: The Economic Science Press (in Chinese).
Fan, J., Wong, P. H., & Zhang, T. J. (2007). Politically connected CEOs, corporate governance and post-IPO performance of China’s newly partially privatized firms. Journal of Financial Economics, 84(2), 330–357.
Fang, L., & Peress, J. (2009). Media coverage and cross-section of stock returns. Journal of Finance, 337(5), 2023–2052.
Godfrey, P. (2005). The relationship between corporate philanthropy and shareholder wealth: A risk management perspective. Academy of Management Review, 30(4), 777–798.
Gordon, T. P., Knock, C. L., & Neely, D. G. (2009). The role of rating agencies in the market for charitable contributions: An empirical test. Journal of Accounting and Public Policy, 28(6), 469–484.
Govekar, M., Govekar, P., & Rishi, M. (2002). The effect of macroeconomic shocks on local corporate philanthropy. Journal of Economics and Politics, 15(1), 15–26.
Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391–430.
Highhouse, S., Brooks, M. E., & Gregarus, G. (2009). An organizational impression management perspective on the formation of corporate reputations. Journal of Management, 35(6), 1481–1493.
Iyengar, S. (1990). The accessibility bias in politics: Television news and public opinion. International Journal of Public Opinion Research, 2(1), 1–15.
Jia, M., & Zhang, Z. (2011). Agency costs and corporate philanthropic disaster response: The moderating role of women on two-tier boards—Evidence from People’s Republic of China. International Journal of Human Resource Management, 22(9), 2011–2031.
Jia, M., & Zhang, Z. (2013). The CEO’s representation of demands and the corporations’ response to external pressures: Do politically affiliated firms donate more? Management and Organization Review, 9(1), 87–114.
La Porta, R., Lopez-De-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54(2), 471–517.
Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48(2), 268–305.
Mattingly, J. E., & Berman, S. L. (2006). Measurement of corporate social action: Discovering taxonomy in the Kinder Lydenberg Domini ratings data. Business and Society, 45(1), 20–46.
McCombs, M. E., & Shaw, D. L. (1972). The agenda-setting function of mass media. Public Opinion Quarterly, 36(2), 176–187.
McGuire, J., Dow, S., & Argheyd, K. (2003). CEO incentives and corporate social performance. Journal of Business Ethics, 45(4), 341–359.
McWilliams, A., & Siegel, D. (1997). Event studies in management research: Theoretical and empirical issues. Academy of Management Journal, 40(3), 626–657.
Miller, G. S. (2006). The press as a watchdog for accounting fraud. Journal of Accounting Research, 44(5), 1001–1033.
Miller, G., & Shanthikumar, D. (2011). Geographic location, media coverage and investor reactions. Working paper, University of Michigan.
Mishina, Y., Dycks, B. J., & Block, E. S. (2010). Why “good” firms do bad things: The effects of high aspirations, high expectations, and prominence on the incidence of corporate illegality. Academy of Management Journal, 53(4), 701–722.
Moon, J., & Shen, X. (2010). CSR in China research: Salience, focus and nature. Journal of Business Ethics, 94(4), 613–629.
Muller, A., & Kräussl, R. (2011). Doing good deeds in times of need: A strategic perspective on corporate disaster donations. Strategic Management Journal, 32(9), 911–929.
Muller, A., & Whiteman, G. (2009). Exploring the geography of corporate philanthropic disaster response: A study of fortune global 500 firms. Journal of Business Ethics, 84(4), 589–603.
Niederhoffer, V. (1971). The analysis of world events and stock prices. Journal of Business, 44(1), 193–219.
Nikkinen, J., & Vähämaa, S. (2010). Terrorism and stock market sentiment. Financial Review, 45(2), 263–275.
Patten, D. M. (2008). Does the market value corporate philanthropy? Evidence from the response to the 2004 tsunami relief report. Journal of Business Ethics, 81(3), 599–607.
Pfarrer, M. D., Pollock, T. G., & Rindova, V. P. (2010). A tale of two assets: The effects of firm reputation and celebrity on earnings surprises and investors’ reactions. Academy of Management Journal, 53(5), 1131–1152.
Pollock, T. G., & Rindova, V. P. (2003). Media legitimation effects in the market for initial public offerings. Academy of Management Journal, 46(5), 631–642.
Rao, H., Greve, H., & Davis, G. (2001). Fool’s gold: Social proof in the initiation and abandonment of coverage by Wall Street analysts. Administrative Science Quarterly, 46(3), 502–526.
Rindova, V. P., Pollock, T. G., & Hayward, M. L. A. (2006). Celebrity firms: The social construction of market popularity. Academy of Management Review, 31(1), 50–71.
Ryan, T. Y. (1997). Modern regression analysis. New York: Wiley.
Saiia, D. H., Carroll, A. B., & Buchholtz, A. K. (2003). Philanthropy as strategy when corporate charity “begins at home”. Business and Society, 42(2), 169–201.
Sharfman, M. (1994). Changing institutional rules: The evolution of corporate philanthropy, 1883–1953. Business and Society, 33(2), 236–269.
Strike, V. M., Gao, J., & Bansal, P. (2006). Being good while being bad: Social responsibility and the international diversification of US firms. Journal of International Business Studies, 37, 850–862.
Tetlock, P. C. (2007). Giving content to investor sentiment: The role of media in the stock market. Journal of Finance, 62(3), 1139–1168.
Tetlock, P. C., Saar-Tsechansky, M., & Macskassy, S. (2008). More than words: Quantifying language to measure firms’ fundamentals. Journal of Finance, 63(3), 1437–1467.
Ting, Y. (2007). Natural disasters in China. Advances in Natural and Technological Hazards Research, 21, 181–192.
Turnley, W. H., & Bolino, M. C. (2001). Achieving desired images while avoiding undesired images: Exploring the role of self-monitoring in impression management. Journal of Applied Psychology, 86(2), 351–360.
Wang, Z. (2008). A preliminary report on the great Wenchuan earthquake. Earthquake engineering and engineering vibration, 7(2), 225–234.
Wang, H., & Qian, C. (2011). Corporate philanthropy and corporate financial performance: The role of stakeholder response and political access. Academy of Management Journal, 54(6), 115–1181.
Williams, R. J., & Barrett, J. D. (2000). Corporate philanthropy, criminal activity, and firm reputation: Is there a link? Journal of Business Ethics, 26(4), 341–350.
Zhang, R., Rezaee, Z., & Zhu, J. (2009). Corporate philanthropic disaster response and ownership type: Evidence from Chinese firms’ response to the Sichuan earthquake. Journal of Business Ethics, 91(1), 51–63.
Zhang, R., Zhu, J., Yue, H., & Zhu, C. (2010). Corporate philanthropic giving, advertising intensity, and industry competition level. Journal of Business Ethics, 94(1), 39–52.
Zyglidopoulos, S., Georgiadis, A., Carroll, C., & Siegel, D. (2012). Does media attention drive corporate social responsibility? Journal of Business Research, 65(11), 1622–1627.
Acknowledgments
This study was funded by grants from National Natural Science Foundation of China (No. 71372065; No.71272002; No.71002049), the Supported by Program for New Century Excellent Talents in University (No.NCET-11-0816; No.NCET-12-0439), and Technology Foundation for Selected Overseas Chinese Scholar (No. 18920004). We also thank to the Program for Star of Shaanxi Youth Science and Technology (grant no. 2013KJXX-52). The authors also express their appreciation to the section editor Thomas Clarke and two anonymous reviewers for their suggestions and comments. However, the authors are responsible for all errors in the paper.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Jia, M., Zhang, Z. News Visibility and Corporate Philanthropic Response: Evidence from Privately Owned Chinese Firms Following the Wenchuan Earthquake. J Bus Ethics 129, 93–114 (2015). https://doi.org/10.1007/s10551-014-2150-7
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-014-2150-7