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How harmful is media coverage?

The major print media do not report on corporate misconduct such as environmental scandals, corruption or the violation of social standards ("corporate social irresponsibility") in a balanced and independent manner, shows a new study by WiSo Professor Marc Fischer.

Cases of corporate "misconduct" such as environmental scandals, corruption or the violation of social standards, summarised in the term "Corporate social irresponsibility (CSI)", are usually reportable events for the media. Such a CSI event can have considerable financial consequences for the affected companies and shareholders.

In a new study, WiSo Professor Marc Fischer (Marketing Area, Key Research Initiative "Digital Transformation") and Samuel Stäbler, Assistant Professor of Marketing at Tilburg University examined media coverage of 1,054 CSI events in 77 leading media from five countries. The average financial loss on the U.S. stock market due to a CSI event amounts to approximately 321 million US dollars.

However, the extent of the damage that a CSI event inflicts on a company depends heavily on how much media attention the event receives. For example, the U.S. stock market only reacted to CSI cases if four or more US media reported on them.

At the same time, it became apparent that the major print media did not report on corporate misconduct in a balanced and independent way. The number of media covering a CSI story was significantly higher for salient and strong brands. Also more media reported if a foreign brand was involved in a domestic CSI event.

According to the results of the study, however the extent of reporting can be influenced. When a brand advertises heavily or exclusively in a news medium for example, this reduces the likelihood of the news medium to cover negative stories about the brand. Understanding the underlying mechanisms by which the news media select events is therefore of utmost relevance to companies to forecast bad press and to find suitable tools for proactive action.

On the other hand, the results suggest that media do not always act in the best interests of society. In this respect, the society is entitled to understand whether there is an equal chance that media cover a CSI event, which so far does not appear to be the case.