IMAP Lunch Seminar: Do or Do Not, There Is No Try: Managing and Mitigating Sociopolitical Firm Risk Events

The Impact Measurement & Allocation Program (IMAP) is jointly led by the Boston University Institute for Global Sustainability and the Questrom School of Business.

Firms are increasingly concerned about mitigating the harm of sociopolitical (SP) firm risk events, with a focus on enhancing outcomes for profits, stakeholder relationships, and firm value. Risk management becomes salient when brands attempt to connect with trending SP issues through public relations and marketing campaigns, but their efforts can backfire by challenging social justice or provoking unanticipated consumer activism. Firms with the best intentions can clash with social norms and expectations.

Chen Jing, Dokyun Lee, Shuba Srinivasan, and Susan Fournier, researchers at BU’s Questrom School of Business, investigate the impact of SP firm risk events on stakeholders’ reactions on social media and firm value and explore strategies to mitigate potential downsides. They use natural language processing methods to label SP social media posts and then apply the difference-in-differences with multiple time periods method to estimate the relationship between mitigation efforts and firm outcomes. The results show that high-effort responses are associated with favorable stakeholder social media reactions, including volume and sentiment. Furthermore, for firms with strong brand equity, closer relationships with wrongdoers, or good performance in ESG or diversity, high-effort responses are associated with even more favorable social media reactions. By contrast, high-effort responses have no association with firm value, except for firms with strong brand equity. Lastly, for firms with distant relationships with wrongdoers, high-effort responses can even backfire. Their findings offer contributions and managerial implications in the context of branding and crisis management for academicians and practitioners. Join us to hear more details on this topic.