Abstract
The aim of this chapter is to investigate the firm-related factors that moderate the effect size of corporate scandals that brands are faced with at times. The issue is analyzed from consumer market and capital market perspectives. An extensive literature review is presented to reveal the existing viewpoints and applications in this aspect. Among the firm-specific factors discussed are brand equity, firm size and industry, corporate reputation, social responsibility, CEO traits, source, and timing of disclosure. It is concluded that although brand scandals are hard to control, depending on various conditions related to both the firm and industry, their effect size can at least be managed with a proactive approach, which is handled at the strategic level.
TopIntroduction
More challenging than achieving growth is sustaining it for a long time in today’s highly demanding economic environment. The real challenge does not lie in having a wide and profitable customer base anymore. It is more related to building an effective relationship based on collaboration with your customers, involve them in the production process and co-create with them. What is of critical importance in doing all these is accountability on the firm side. It would be hard to trace sustainable development in an environment where the corruption of the public officials, poor management of resources, leadership challenges and resulting lack of accountability prevail (Gberevbie, Joshua, Excellence-Oluye, & Oyeyemi, 2017). In a similar vein, sustainable development would be a challenge in an informal organizational structure, which lacks the ethical cultural dimension of supportability for employees experiencing trust and respect to adopt certain ethical norms and rules (Zaal, Jeurissen, & Groenland, 2019). For this reason, it is considered to be a must to question the unethical behaviors in which firms may get involved from time to time in order to have an idea of the business sustainability in a collaborative economy today.
The aim of this paper is to investigate the differential effects of brand scandals that firms face in consumer markets and capital markets, as well as locating the firm-specific variables framing these effects on both markets. To this end, an extensive literature review regarding the impacts of brand scandals on these two market types is presented. The firm-specific factors, such as firm size and industry, brand equity, corporate reputation, and CEO traits, are further investigated as to their effects on the extent of these scandals. The study is concluded with the discussion of the conceptual viewpoints presented.
Key Terms in this Chapter
Consumer Markets: The markets where end-consumers buy or sell in order to meet their own needs in their everyday lives.
Information Asymmetry: The imbalance in the quality identification by means of signals between the different agents that directly get involved in the market operations.
Capital Markets: Financial markets where long or short term securities are traded by professional buyers and sellers.
Shareholder Theory to Brand Scandals: The approach which positions shareholders as the main beneficiary of the overall trading activities, yet emphasizes the importance of open and free competition without deception or fraud.
Stakeholder Theory to Brand Scandals: The approach which adopts a more extensive view into scandals incorporating stakeholders such as employees, financiers, suppliers, customers, and communities, as the direct agents in which the firm has direct responsibilities too.
Brand Equity: The set of assets and liabilities that can be attached to a brand that adds to or subtracts value.
Brand Scandals: Wrongdoings which lead to public controversy and often threaten the corporate identity.