How Social Media Communications can Mitigate Negative Impacts of Corporate Social Irresponsibility on Corporate Financial Performance?

Previous research on corporate social responsibility (CSR) has focused on corporate reputation (CR) and corporate financial performance (CFP), showing a high correlation between both. While most researchers primarily focus on CSR, our research examines the other side of the coin; corporate social irresponsibility (CSI) and provides findings that counter previous thought. We contribute to the existing literature by showing that CSI has a non-significant impact on corporate financial performance, as measured by market value, while concurrently being negatively correlated to corporate reputation. Further, we show social media, as measured by the Social Media Sustainability Index (SMSI), a measure studied infrequently thus far in the literature, mediates the relationship between CSI and market value. This relationship between social media and financial performance is further strengthened when companies actively engage in other CSR activities that “fit” their image. From a practical standpoint, when companies “misbehave” our research reveals how to mitigate those effects in regards to financial performance