Corporate controversy, social responsibility and market performance: International evidence

This study explores whether firms strategically utilize symbolic and substantive CSR as means to repair reputational damage following a corporate controversy. Further, we shed light on market reaction towards firms’ engagement in symbolic and substantive CSR and how such reaction varies across countries when differing levels of trust are evident. Using a sample of 9117 firm-year observations in an international setting, we find that firms are more likely to engage in symbolic CSR than substantive CSR and the relationship between the level of controversy and the firm’s engagement in symbolic CSR is an inverted U. In addition, our two-way interaction analysis illustrates that the market positively views the symbolic CSR engagement following a corporate controversy, and this positive effect is only pronounced in countries with higher levels of mutual trust.