Stock investors punish companies caught doing something unethical a lot more when when these businesses also have a record of portraying themselves as virtuous. This hypocrisy penalty is the main finding of a study we recently published in the Journal of Management.
Companies often espouse their supposed virtue – known as ‘virtue signaling’ – usually with the aim of getting benefits, such as higher sales, positive investor sentiment or better employees. We wanted to know what happens when such companies then do something wrong.
So we examined corporate communications and media coverage for every company in the Standard & Poor’s 500 . . .
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