Research On The Impact Of Reputation On Stakeholder Behavioral Response In Corporate Crisis Situation

In recent years, corporate crises occur frequently. The crisis always comes unexpectedly and no firms can avoid the threat from these crisis events. The essence of corporate crisis is not the causes of the event itself, but the overall distrust and negative evaluation from the stakeholder groups, and corporate image and reputation would be damaged as a result of these crises. In the past crisis management literatures, corporate reputation is regarded as an outcome variable affected by the crisis, there are intensive analysis about negative effect of the crisis on organizational reputation. As an important antecedent that is often overlooked, there are a limited number of the relative studies to explore the effect of corporate original reputation on crisis events. Meanwhile, the results in those few researches also have the different controversy and rifts. On the one hand, corporate reputation is widely recognized as an intangible asset, and thus may play a value-preserving role in times of crisis. On the other hand, a favorable reputation could also be a liability for a firm and aggravate the negative effect of a crisis. Thus, the purpose of the paper is to investigate the role of corporate reputation and the effect of corporate reputation on stakeholder behavioral response in corporate crisis situation.Through studying the existing literatures, we find the cause of disputes and disagreements is that different scholars have clashing definitions of reputation and these researchers ignore the difference of crisis scenarios. Reputation is frequently considered as a one-dimensional construct in previous studies. While based on Lange’s theoretical analysis, this paper regards reputation as a multidimensional conceptualization. Reputation consists of familiarity with the organization, beliefs about what to expect from the organization in the future, and impressions about the organization’s favorability. As the most key and direct stakeholders, investors and stakeholders often become victims of corporate crises. Meanwhile, their attitude and behaviors affect the firm in turn. From the perspectives of investors and consumers, this paper investigates the effect of different dimensional reputation in crisis situations. The main works are as follows:Firstly, we analyzed the impact of corporate crises on stock market reaction. Based on 130 accident announcements made by China’s A-share publicly listed firms from 2007 to 2014, we used the event study method to investigate the impact of safety accident announcements on stock market volatility. We found that corporate self-disclosure of safety accident have negative and significant effects on firm’s daily abnormal return. By virtue of listed firms’announcements or media coverage of news media, crisis event information was widely known by investors. The negative information will change investors’evaluation of the internal value of listed firms and their expectations of capital markets, thus prompting investors to make corresponding decision behavior, and causing the stock price volatility. After analyzing stock reaction multi-dimensionally, we found that the sampled firms that were controlled by the state and release announcement protractedly generally experienced a more negative market response.Secondly, from the perspective of the investor, we study how multiple dimensions of reputation (including generalized favorability and being known) affect firm value at the onset of a crisis, and how these effects depend on the attribution of crisis responsibility by analyzing 126 corporate crises in 2008-2014 befalling publicly listed firms in China. We find that being known to investors is a burden, while generalized favorability to the public serves as a buffer. These effects are stronger when the attribution of crisis responsibility is low (vs. high). In addition, there is a negative interaction effect between the two dimensions of reputation such that the positive effect of generalized favorability is stronger when firms are less known.Finally, from the perspective of the consumer, we conducted a case study of the Fall-Volkswagen automobile recall in 2014, we studied how multiple dimensions of reputation (including social responsibility reputation and corporate capacity reputation) affect consumer attitudes and behaviors based on the empirical background of the Fall-Volkswagen automobile recall in 2014 by means of the questionnaire. The results showed that the reputation of corporate social responsibility could relieve consumers’ risk perception while the effect of corporate capacity was not significant. In addition, we found that the reputation of corporate social responsibility and corporate capacity have a significant effect on consumers’satisfaction, consumers who were more satisfied with corporate response would have a higher likelihood of taking citizenship behavior.Originality of this study is summarized as follows:Firstly, most measurements methods of reputation concentrate on one dimension. Although Fombrun and Shanley proposed that the future research should specify the dimensions of corporate reputation. Lange et al. also suggested that the empirical studies of corporate reputation should be conducted from multiple dimensions of the reputation concept. However, the subsequent research had not addressed this problem ideally. Since the previous studies had neglected the multidimensional concept of reputation, this study regards reputation as a multidimensional concept. We analyzed the effects of different dimensional reputation in a crisis situation through the empirical study.Secondly, this study investigated investors’ reaction to corporate crises, we analyzed the distinct role of different dimensional reputation in a crisis situation. To some extent, this study relieved the debate about double edge of corporate reputation. We find that generalized favorability to the public serves as a buffer, reducing the loss of shareholder wealth after the crisis. While being known to investors is a burden, intensifying the loss of shareholder wealth after the crisis. And the attribution of crisis responsibility will moderate the opposite effect of reputation. Therefore, this article revealed the tension between the protective effect and the detrimental effect of reputation. Although the attribution of responsibility was considered to be a key construct for stakeholders’ reaction, the existing literature study basically remained in the conceptual level. To the best of our knowledge, this article empirically investigated the impact of attribution of crisis responsibility on corporate value for the first time. By analyzing the real stock market reaction to more than one hundred crises incidents, we provided a beneficial supplement for the most of the past research depending on the survey or experimental method which just covering a few crises.Thirdly, research conclusionabout about the impact of good corporate reputation on the consumer market have always been contradictory. From the perspective of consumer expectations, this paper proposed a model about the effects of two kinds of dimensional reputation:well-known for social responsibility and ability on consumers’ risk perception, satisfaction and consumer citizenship behavior. We examined the transmission mechanism of different dimensions of corporate reputation on consumer behavior and provided a new perspective to analyze corporate reputation on the consumer market.Fourthly, this study selected real crises as empirical background, and took investors and consumers who affected by the crisis of stakeholders as samples. They are the most critical stakeholder groups of the firm.Their cognitions of corporate crises are from real experience rather than giving, reflecting more evaluators’real attitude and behavior. This study filled gaps of the research method in which they manipulated virtual situation to study corporate crises and evaluators’ reaction.The practical implication of this study is that:we view corporate reputation as a multidimensional concept. From the perspective of important stakeholders:investors and consumers respectively, we analyzed the impact of different dimensional reputation in crisis situation and provided mainly decision-making basis and reference for the corporate crisis management and reputation management.