Abstract
PurposeThis paper explores how a firm's public stand on a social-political issue can be a salient signal of the firm's values, identity and reputation. In particular, it investigates how boycott participation–conceptualized as a cue of a corporation's stand on important social-political issues–may affect the stock market valuation of that corporation, as well as how corporations legitimise their stand on the issues.Design/methodology/approachThe authors employ a mixed-methods design that uses both qualitative techniques (content analysis) and quantitative methods (event study methodology) to examine a sample of US firms who participated in a boycott campaign that sought to call attention to issues of hate speech, misinformation and discriminatory content on social media platform Facebook.FindingsFindings from the qualitative content analysis of company statements show that firms legitimise their stand on, and participation in, the boycott by expressing altruistic values and suggesting to stakeholders that their stand aligns not only with organizational values/convictions but also with the greater social good. Importantly, the event study results show that firms who publicly announced their intention to participate in the boycott, on average, earn a statistically significant positive abnormal stock return of 2.68% in the four days immediately after their announcements.Research limitations/implicationsFindings relate to a specific case of a boycott campaign. Also, the sample size is limited and restricted to US stocks. The signalling value of corporate social advocacy actions may vary across countries due to institutional and cultural differences. Market reaction may also be different for issues that are more charged than the ones examined in this study. Therefore, future research might investigate other markets, use larger sample sizes and consider a broader range of social-political issues.Practical implicationsThe presence of significant stock price changes for firms that publicly announced their decision to side with activists on the issue of hate propaganda and misinformation offers potentially valuable insights on the timing of trades for investors and arbitrageurs. Insights from the study also provide a practical resource that can be used to inform organizations' decision-making about such issues.Social implicationsTaking the lead to push on social-political issues, such as hate propaganda, discrimination, among others, and communicating their stands in a way that speaks to their values and identity, could be rewarding for companies.Originality/valueThis study provides novel evidence on the impact that corporate stances on important social-political issues can have on stock market valuation of firms and therefore extends the existing related research which until now has focused on the impact on consumer purchasing intent and brand loyalty.
Highlights
Recent years have seen increased scholarly interest in corporate social advocacy (CSA)–i.e. a company’s public stance on often contentious social-political issues (e.g. Coombs and Holladay, 2018; Dodd and Supa, 2014; Rim et al, 2020; Wettstein, and Baur, 2016)
4.1 Qualitative content analysis A qualitative content analysis is used to answer on the question: how did firms justify their stand on the issues that the boycott sought to address and what motives, values and beliefs are identified in the company statements that conveyed their stand?
As noted in the preceding section, we identified company statements adjoined to the boycott participation announcements and considered what the key motives or messages were and how they were framed
Summary
Recent years have seen increased scholarly interest in corporate social advocacy (CSA)–i.e. a company’s public stance on often contentious social-political issues (e.g. Coombs and Holladay, 2018; Dodd and Supa, 2014; Rim et al, 2020; Wettstein, and Baur, 2016). The focus lies on building an understanding of how a firm’s public stance on a social-political issue can be a salient signal of the firm’s values, identity and reputation, as well as exploring the extent to which the way that the firm legitimises its stance can influence investor evaluations of the firm, contributing to its stock market value We address these questions by employing data on announcements by US firms to side with activists on the boycott campaign in June 2020 targeted at Facebook, Inc. The boycott campaign, called Stop Hate for Profit by the activist groups that started it, claimed that Facebook was profiting from allowing hate speech and misinformation to spread on its platform and urged companies across America to halt all advertisements on Facebook in order to pressure the company to re-evaluate its policies which are alleged to enable the spread of hateful, misinformed and divisive information (Rawlings, 2020; Walker, 2020). The justifications provided by firms for their decisions to join the boycott, and how they were framed, can play an important role in influencing stakeholders’ perceptions of the firms’ actions and how the value of the actions is determined in the stock market (Benford and Snow, 2002; Pollock and Rindova, 2003; Rhee and Fiss, 2014; Zajac and Westphal, 2004)
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