The quicker, the better? The antecedents and consequences of response timing strategy in the aftermath of a corporate crisis

Abstract

Purpose

The conclusions on the importance of corporate response timing to a crisis have remained inconsistent. Some studies suggest that active response may reduce negative impacts, whereas managers argue that issuing official response frustrates stakeholders and thus decreases the firm value. The purpose of this paper is to investigate the role of external media in the response timing strategy and the consequent stock market reaction.

Design/methodology/approach

Based on 130 corporate crises that befell publicly listed firms in China from 2007 to 2014, this paper uses the Baidu News Search Engine and Chinese Lexical Analysis System to construct the variables of the media characteristics. A structural equation model is established to test the hypotheses.

Findings

The results of this paper suggest that media coverage drives response timing after a crisis. Although an official response is a burden for firms, the timing strategy has multidimensional benefits including effectively alleviating negative effects (defined as buffering effects) and repairing the market (defined as restoring effects). Moreover, the buffering effects of response timing are stronger when completeness of response is low.

Originality/value

This study mainly contributes to crisis communication literature by introducing the role of media in prompting managers to make timing decisions. The findings of this study provide empirical support for the importance of timing response strategy.

Citation

Yao, N.(C)., Wei, J., Zhu, W. and Bondar, A. (2019), "The quicker, the better? The antecedents and consequences of response timing strategy in the aftermath of a corporate crisis", Baltic Journal of Management, Vol. 14 No. 1, pp. 19-38. https://doi.org/10.1108/BJM-06-2017-0185