Does Who We Are Influence What We Say? The Impact of Organizational Identity on Responses to Ethical Issues

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Guerber, Amy J.
Corporate Communication; Financial Restatement; Organizational Ethics; Organizational Identity; Business Administration, Management, and Operations; Organizational Behavior and Theory
thesis / dissertation description
Business organizations frequently face ethical issues which may lead stakeholders to question the competence or integrity of organizational actors. In such cases, the way the organization communicates with its stakeholders can play a critical role in preserving or restoring organizational reputation, financial performance, and trust. Thus, understanding factors that influence organizational communication in the wake of ethical issues is important. Previous research has focused on the impact of situational characteristics on organizational responses and stakeholder reactions to those responses but has not explored the role that organizational characteristics play in shaping firms' responses to ethical issues.The current study seeks to understand how organizational characteristics influence responses to ethical issues. The focus of the paper is the initial communicative response, defined as the first public statement made by an organization regarding an issue which may be perceived as an ethical one. This study examines responses to one type of ethical issue which many companies face - financial restatements. The outcomes of interest in this study are the prominence and informativeness of restatement announcements made by organizations after learning of a need to correct previous financial misstatements. Hypotheses focus on the influence of organizational characteristics on restatement announcements, using an organizational identity framework. Specifically, it is predicted that organizational identity orientation and the extent to which social responsibility is included in the content of an organization's identity will shape managers' perceptions of and responses to ethical issues.Results provide evidence of a relationship between a relational/collectivistic OIO and the informativeness of a firm's initial restatement announcement as well as a positive correlation between the magnitude of the restatement and the informativeness of the restatement announcement. Results also show a significant negative interaction between a relational/collectivistic OIO and the magnitude of the restatement in predicting the amount of information provided. The interaction between commitment to social responsibility and the magnitude of the restatement in predicting the informativeness of the announcement is marginally significant and positive. Taken together, these findings provide evidence that organizational characteristics can influence responses to ethical issues and also interact with situational factors to further influence responses to these issues.