Understanding Reputational Crisis: Definition, Properties, and Consequences

Abstract

To better understand the nature of reputational crisis, this study examined two crisis events using the corporate ability (CA) and corporate social responsibility (CSR) crisis categorization frameworks. This scenario-based experimental study validates the usefulness of the CA–CSR crisis categorization by demonstrating that not only do people actually discern differences between these two types of crises, but their awareness of a crisis type also influences their interpretation of the crisis, as well as their perceptions of and attitudes toward the target firm. In particular, this study shows that a CSR crisis, versus a CA crisis, is interpreted more seriously and, consequently, causes heavier damage to the evaluation of the firm. In addition, the halo effect of a favorable prior reputation was found in the CA crisis condition, but not in the CSR condition. Based on these findings, this study suggests that the recognition of CA and CSR crises provides a boundary condition, which determines divergent effects of crises on perceivers' evaluation of the target firm.

Notes

**Significant at the .01 level.

^a The mean scores are estimated mean, adjusted by controlling over perceived crisis severity.

**Significant at the .01 level.

Note. M =group mean. N = Negative (crisis) information. P = Positive (reputation) information. NPPP = Negative-Positive-Positive-Positive time order.

^a The mean scores are estimated mean, adjusted by controlling over perceived crisis severity.

**The effect of CA–CSR categorization is significant at the .01 level.

Note. N = Negative (crisis) information. P = Positive (reputation) information. NP₁P₂P₃ = Negative-Positive-Positive-Positive time order.

*Significant at the .05 level.

**Significant at the .01 level.

Note. CA = Corporate Ability. CSR = Corporate Social Responsibilities.

^a The mean scores reflect adjusted after controlling over perceived crisis severity.

Note. M =group mean. N = Negative (crisis) information. P = Positive (reputation) information. PN = Positive-Negative time order (reputation group). N = Negative only (control group).

*Significant at the .05 level. **Significant at the .01 level.

**Significant at the .01 level.