Abstract
This study examines the effects of peer firms’ product recall events on focal firm’s product related corporate social responsibility (CSR) investment. I theorize that peer firms’ product recall events generate negative reputation spillover and attract strong scrutiny by shareholders in the focal firm, which makes the focal firm engage in product related CSR to insure against the negative reputation spillover of product recalls. I find that focal firm increases its product related CSR activities following product recall by peers. Meanwhile, this effect is stronger when the peers occurring product recall have greater market share, larger size, or more media coverage. The findings suggest that the reputation spillover of product recalls affects a focal firm’s decision to become more socially responsible.
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