The Pressure of Being Celebrated - An Investigation of Firm Responses toward a Celebrity Event

Abstract

While most researchers claim that celebrity serves as valuable intangible asset to a firm, we examine the possibility that celebrity may become a liability to the firm. Drawing on research in celebrity, relative deprivation, and instrumental stakeholder management, we argue that higher pressure associated with celebrated actors will push them to engage in two seeming contradictory strategies simultaneously: activities that bridge with stakeholders and activities that buffer from stakeholder pressures. Specifically, we hypothesize that firms will respond to being celebrated by engaging in a higher level philanthropy as a bridging strategy. While at the same time, they will also decrease their accounting transparency as a buffering strategy. We further argue that the extent to which firms engage in these two strategies will depend upon the felt deprivation of stakeholders toward the celebrated firms, reflected by a firm's political connection and business nature. The hypotheses were tested based on a sample of 297 publicly listed Chinese firms whose leaders were presented in the Hurun rich list during the period of 2003-2011, which is an important celebrity generation mechanism. The results from the difference-in-difference approach largely confirm our predictions. This study enhances our understanding of how firms respond to the pressure of being celebrated and extend current research on celebrity and stakeholder management.