The disparate economic outcomes of stigma: Evidence from the arms industry

Research Summary Organizational stigma has been commonly associated with a number of negative economic externalities in prior literature, but the mechanism by which this occurs and extent consequences have received little attention. We address these gaps theorizing that stigmatizing labels damage legitimacy target highlighting deviation from expectations relevant audiences. also argue content focus labels, as well features stigmatizer audience deploying them, will affect magnitude stigma. Through an analysis linking condemnation arms producers media between 1998 2016 to cumulative abnormal returns (CAR) stock market, we find broad support for our arguments. Managerial This paper examines impact stakeholder criticism on firms, using data global industry develop typology based its content, focus, origin. can negatively firm's market returns, particularly when those criticizing authority condemn specific behaviors. Civil society entities like nonprofits or media, politicians, players such investors each unique criticize harmful behavior, illegal unethical affiliations, respectively. Understanding different types their potential help firms better manage relationships mitigate impacts financial performance.