Can Sinful Firms Benefit from Advertising Their CSR Efforts? Adverse Effect of Advertising Sinful Firms’ CSR Engagements on Firm Performance

Hannah Oh, John Bae, Sang Joon Kim

Research output: Contribution to journalArticlepeer-review

59 Scopus citations

Abstract

This study investigates corporate social responsibility (CSR) of sinful firms, which refer to ones that are operating in controversial industries, including the production and distribution of alcohol, tobacco, gambling, adult entertainment, firearm, military, and nuclear power. We attempt to answer two questions in this study: (1) Do these sinful firms actively advertise their CSR engagements compared to non-sinful firms? And (2) do their advertising efforts really yield increased financial performance? Positing that advertising not only can make sinful firms’ good deeds visible, but also can highlight the contradiction between these firms’ stigma and their prosocial activities, we claim that sinful firms are likely to advertise their CSR engagement to overcome their stigmatized firm image, but these advertising activities will make the firms’ performance vulnerable by inducing skepticism from stakeholders. Using KLD database in conjunction with COMPUSTAT and Center for Research in Security Prices from 1991 to 2010, where 337 firms are involved in the controversial sinful industries, namely tobacco, alcohol, gaming, firearms, military, and nuclear power, we examine the effect of advertising spending of sinful firms’ CSR engagement on performance vulnerability, which is instantiated with idiosyncratic risk. The empirical results indicate that sinful firms increase their advertising expenditure when they engage in CSR programs, but these efforts for advertising CSR tend to increase idiosyncratic risk. This finding indicates that even though sinful firms can benefit from engaging in socially responsible initiatives, advertising their CSR efforts may backfire.

Original languageEnglish
Pages (from-to)643-663
Number of pages21
JournalJournal of Business Ethics
Volume143
Issue number4
DOIs
StatePublished - 1 Jul 2017

Keywords

  • Advertising
  • Corporate social responsibility
  • Firm idiosyncratic risk
  • Performance vulnerability
  • Sinful firms

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