Can corporate social reporting mitigate reputational risk? The role of ambivalence and attribution

Chen, Zhifeng; Hang, Haiming; Pavelin, Stephen; Porter, Lynda

Authors

Zhifeng Chen

Haiming Hang

Stephen Pavelin

Lynda Porter

Abstract

While disclosing corporate social and environmental performance has become a common practice around the world,
whether such reporting can effectively mitigate reputational risk remains unclear. The existing empirical evidence is not
only indirect but also contradictory. Drawing upon signaling theory and expectation violation theory, we take a
stakeholder’s perspective to develop a novel theorization of the drivers of reputational losses, which notably identifies
key roles for attribution and ambivalence. Our experimental results suggest disclosing positive social performance
makes a firm suffer less reputational loss in a socially irresponsible event. But a firm with strongly positive social
performance does not suffer less reputational loss than a firm with weakly positive social performance. Our results
further suggest this effect is mediated by participants’ attribution of the negative event. More importantly, our results
suggest these effects are moderated by participants’ ambivalence strength. Those participants that become highly
ambivalent largely disregard the firm’s prior record of social performance, and focus upon negative event when judging
the firm. In contrast, those participants that experience little or no ambivalence draw upon a firm’s prior record of social
performance alongside the negative event, and a firm’s prior positive social performance tends to reduce the
attribution of the event to the firm and lessen reputational harm. These results have important implications for both
reputational risk management literature and the literature on causal reasoning in reporting