Sales response to corporate social irresponsibility and the mitigating role of advertising

Abstract

Purpose

This study examines the relationship between corporate social irresponsibility (CSI) and firm-level sales and estimates the potentially mitigating role of advertising.

Design/methodology/approach

To test their hypotheses, the authors conduct an empirical investigation using a sample of 381 US firms engaging in socially irresponsible behavior.

Findings

The results of this investigation indicate that while sales are negatively impacted during the year of a CSI event, they generally recover in the year immediately following the event. In addition, advertising is shown to mitigate the negative impact of CSI on sales in both the event year and the year immediately following. The authors also consider whether differences exist between CSI firms with and without advertising. From this comparative analysis, it is observed that CSI firms which advertise tend to experience more severe declines in sales. Also, such firms tend to recover from the negative implications of CSI sooner.

Originality/value

This paper provides a novel and empirical approach to assessing the relationship between CSI events and firm-level sales while quantifying the mitigating effects of advertising. Furthermore, the unique contributions and practical findings of this research generate strong support for the significant role advertising can play in helping firms recover from CSI-based brand crisis events and help to establish a promising path for future research.

Citation

Sharpe, S. and Hanson, N. (2021), "Sales response to corporate social irresponsibility and the mitigating role of advertising", Management Decision, Vol. 59 No. 10, pp. 2456-2472. https://doi.org/10.1108/MD-07-2020-0964