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Despite growing interest in misconduct spillovers – where unimplicated bystanders’ stock prices, reputations, resources, and opportunities are positively or negatively affected by others’ misconduct – theory about spillovers’ antecedents has largely focused on industry or product similarity, and has used the same characteristics to argue for both positive and negative spillovers. Furthermore, limited research has considered both positive and negative spillovers together, instead focusing on one kind of spillover or the other in isolation, thereby creating a lack of theoretical integration within the literature. In this chapter, we draw on attribution theory and expectancy violations theory to explain when and how misconduct incurs positive and negative spillovers. We argue that a spillover’s valence depends on the locus of attributions made by stakeholders, where the misconduct’s causes are attributed to the perpetrator alone (i.e., an isolated attribution) – resulting in positive spillovers – or the misconduct’s causes are perceived as indicative of a systemic problem shared among a broader set of organizations (i.e., a systemic attribution), leading to negative spillovers. We further suggest that the misconduct’s nature and misconduct prevalence within a perpetrator and among other firms influences stakeholders’ attributions, and ultimately the spillover’s valence. Our theory contributes to the organizational misconduct literature by providing a unifying theoretical framework to understand both positive and negative spillovers.

Corporate misconduct carries significant social and economic costs, and therefore regulators and other stakeholders seek to deter it. Despite the significant costs and deterrence efforts, corporate misconduct is widespread and our understanding of it is limited. As argued in this chapter, one key reason for this is the lack of understanding of the benefits and penalties of misconduct for the companies and individuals involved, as well as the detection of such behavior. This chapter seeks to advance our understanding of corporate misconduct and builds on the rational choice model (RCM) – where the decision to engage in misconduct hinges on a calculation of the expected costs and benefit – and links it to research in organization theory and strategy. Specifically, it sets a research agenda at the intersection of organizational and strategic perspectives, to deepen our understanding of corporate misconduct and shed light on opportunities for empirical and theoretical research which can potentially aid in developing effective deterrence strategies.

When organizations engage in misconduct, social control agents play a crucial role in sanctioning them to show the enforcement of societal norms and reduce the risk of future deviance. We study the interaction between the government and the media, two key social control agents, in the evaluation organizational misconduct. While past work has focused on the influence of the media on the government, we theorize the influence of the government on the media. The government is a social control agent with supreme formal authority to punish misconduct, and thus its actions are of particular interest to the media as they form evaluations of misbehaving organizations. However, the government, tied by conflicting demands, sometimes turns a blind eye to misconduct and supports misbehaving organizations for the greater societal good, instead of punishing them. How is the media’s perception of misbehaving organizations affected by such government actions? We explore this question by looking at the case of the 2008 government bailout of investment banks in the United States, after those were caught red-handed for their involvement in the sub-prime financial crisis. Carrying out a content analysis of newspaper reporting (2007–2011), we show that the negative perception of investment banks and their misconduct is attenuated when they receive government support. Our work contributes to the emerging literature on the social construction of organizational misconduct and illuminates the interaction between government and media in the evaluation of behavior as organizational misconduct.

Scandal is the disruptive publicity of alleged misconduct and it is important for organizations because of its severe consequences. Distinguishing between single-actor scandals, i.e., scandals that result from publicity of misconduct by a single actor, and multiple-actor scandals, i.e., scandals that result from publicity of misconduct of a similar type by multiple actors, we develop a framework for studying scandal dynamics that draws a distinction between how scandals start (single-actor or multiple-actor) and how they end (single-actor or multiple-actor). We focus specifically on spillover scandals (from single to multiple actors) and scapegoating scandals (from multiple to single actors) and identify several mechanisms that affect the likelihood of these two important types of scandals. We conclude by developing a research agenda that builds upon the central contribution of our framework: the distinction between single- and multiple-organization scandals and the transitions that result in spillovers and scapegoating.

This chapter investigates the effect of the geographical distance between institutional investors and firms on managers' financial misconduct. The evidence shows that the likelihood of committing financial misconduct by management is positively associated with distance. The distance effect is more prominent for firms with higher information asymmetry and more dedicated institutional investors. In line with the balance between risk-taking and benefit extraction from misconduct, the severity of financial misconduct is higher for firms closer to their institutional investors. Results show that geographical proximity can significantly reduce the cost of information production and facilitate monitoring through access to soft information.

This study aims to examine the real effects of financial misconduct on corporate innovation.

The authors use a sample of Chinese A-share listed firms from 2006 to 2017. This study uses several empirical strategies to deal with endogeneity concerns, including Heckman’s two-stage correction approach, propensity score matching and instrumental variables.

The authors’ findings consistently show that financial misconduct impedes corporate innovation. Furthermore, the authors’ analysis demonstrates that the negative impact of financial misconduct is more pronounced in nonstate enterprises. The authors also show that financial misconduct discourages innovation through information, short-termism and financing channels.

This paper is of particular interest to policymakers, as firm behavior is heavily regulated and altered by securities laws and regulations over time. The authors recommend firms to observe financial regulatory laws to promote capital market integrity and enhance shareholder value through innovation projects. The authors also recommend that regulators provide incentives that encourage corporate transparency and use new technologies to detect financial misconduct quickly.

Few studies in literature investigate the real consequences of financial misconduct on firm investments. Hence, this paper fills this gap by analyzing the implications of financial misconduct on corporate innovation. This study is one of the first to provide new insights into the adverse effects of financial misconduct on firm-level innovation, supported by empirical evidence.

This study aims to investigate the tendency for firms, exhibiting an entrepreneurial spirit in their growth strategies, to engage in misconduct within the context of China's rapidly developing economy. The authors also examine how this relationship is influenced by governance mechanisms, specifically management shareholding and executive functional diversity. Furthermore, the authors explore the mediating roles of organizational complexity and performance pressure in linking entrepreneurial growth to firm misconduct. This research provides a novel perspective for understanding the impact of entrepreneurial growth on corporate ethical risks, and offers practical insights for maintaining ethical standards in firms during their pursuit of growth.

This study focuses on publicly traded, mature companies that exhibit an entrepreneurial inclination in their growth strategies, demonstrating entrepreneurial vigor through activities such as product innovation and market expansion. This exploration incorporates both theoretical and empirical approaches, scrutinizing A-share listed companies in China from 2008 to 2019. To validate the robustness of this study's findings, the authors have applied diverse methodologies such as propensity score matching, classification regression, and alternative indicator analysis.

This study found that the entrepreneurial growth-oriented strategy is positively related to firm misconduct. It also uncovers that governance mechanisms like management shareholding and executive functional diversity moderate this relationship. Moreover, organizational complexity and performance pressure partially mediate the relationship between an entrepreneurial growth strategy and firm misconduct.

For instance, more detailed categorization of corporate misconduct, based on punishment severity, could be explored. Additional characteristics like age, education, gender, and team/board diversity could help further understand the relationship between entrepreneurial growth strategy and misconduct. By addressing these limitations and exploring further avenues for research, the authors can deepen the understanding of this relationship and provide valuable insights for firms seeking to mitigate potential risks.

First, for regulators, shareholders, creditors and investors, knowing and understanding the relationship between growth-oriented strategies and corporate violations is helpful for them to scientifically evaluate the potential risks that may exist in the company, and can also carry out differentiated supervision on the company based on different types of company-oriented strategies. Second, when designing the corporate governance mechanism, listed companies should fully consider the role of management shareholding. Finally, executives should treat cross-functional experience dialectically, especially in growth oriented strategic companies.

This research provides a novel perspective for understanding the impact of entrepreneurial growth on corporate ethical risks, and offers practical insights for maintaining ethical standards in firms during their pursuit of growth.

This study stands out by examining the influence of entrepreneurial growth strategy on firm misconduct, thus enhancing previous studies that primarily centered on entrepreneurial start-ups. The authors offer a nuanced comprehension of the potential risks intrinsic to corporate entrepreneurship and highlight the crucial role of efficient governance structures in curbing corporate misbehavior while fostering entrepreneurial growth.

This research aims to examine the role of consumers' brand trust and attachment on advocacy intention before and after the occurrence of brand misconduct in retail banking. In addition, the influence of brand attachment on consumers' willingness to switch, advocate for and forgive brands is examined in a post-misconduct scenario.

Data were collected through a self-administered online survey questionnaire. A total of 304 valid and usable responses from Australian participants were analysed using IBM SPSS 27.0.

The findings reveal that brand attachment mediates the positive relationship between trust and advocacy intention. Furthermore, brand attachment (1) dilutes consumers' switching intention and (2) strengthens their willingness to forgive the bank after misconduct.

Results suggest that retail banks should create strong brand attachments with their consumers. In addition to brand trust, brand attachment will generate greater advocacy intention among consumers. Moreover, practitioners in retail banking can leverage brand attachment to mitigate the negative impact of brand misconduct.

To the best of the authors' knowledge, this study is the first to examine the impact of brand attachment on the consumer–bank relationship within the context of brand misconduct. The study is also unique in its analysis of the mediating role of brand attachment between brand trust and advocacy. This research further adds to the current literature by suggesting that strong and positive customer connections to the brand facilitate communication and marketing efforts after brand misconduct and that these are effective in maintaining consumer-bank relationship.

The purpose of this paper is to conceptualize how past corporate social responsibility (CSR) affects the occurrence of organizational misconduct by the means of moral licensing.

To this end, the authors conduct a conceptual review and develop a framework illustrating how moral credits and moral credentials (moral licensing) may institutionalize irresponsibility and lead to subsequent misconduct.

The authors propose a conceptual framework that describes the relationship between past CSR and organizational misconduct by the means of moral licensing. Based on initial literature-based findings, this paper provides confirmatory evidence for the authors’ framework and illustrates that past CSR might be used as a moral licensing tool that eventually fosters the occurrence of organizational misconduct.

The authors propose future researchers account for the moral licensing effect when examining the antecedents of misconduct and explore the potential moderators of this effect.

The authors recommend that organizations establish management control systems that specifically address the issue of moral licensing when evaluating CSR initiatives. The authors also propose that organizations should adhere to a consistent CSR strategy that potentially fosters the selection of moral leaders who are not prone to moral licensing.

To the best of the authors’ knowledge, this paper is the first to connect corporate social responsibility, moral licensing and organizational misconduct from a conceptual perspective.

This study aims to analyse how the collective processing of the #MeToo legacy in the form of community discourses and activism conceptualises organisational accountability for sexual misconduct at work and enhances the development of new accountability instruments.

The study draws on social movement theory and the intellectual problematics of accountability, together with the empirical insights from two research engagement projects established and facilitated by the author.

The study reveals multiple dimensions of how post-#MeToo community activism impacted the conceptualisation of organisational accountability for sexual misconduct at work. The movement enhanced discourses prompting a new societal sense of accountability for sexual wrongdoings. This in turn facilitated public demands for accountability that pressured organisations to respond. The accountability crisis created an opportunity for community activists to influence understanding of organisational accountability for sexual misconduct at work and to propose new accountability instruments advancing harassment reporting technology, as well as an enhancing the behavioural consciousness and self-assessment of individuals.

The study addresses a topic of social importance in analysing how community activism arising from a social movement has transformed accountability demands and thus both advanced the conceptualisation of organisational accountability for sexual misconduct at work and established socially desirable practices for it. The study contributes to theory by revealing the emancipatory potential of community activism to influence organisational accountability practices and to propose new instruments at a moment of organisational hesitation and crisis of accountability.