It’s in the news! The role of media in disseminating sustainability information and in moderating consumers’ and employees’ perceptions of firms

• Applicants: Professor Dr. Benedikt Downar; Professor Dr. Jürgen Ernstberger
• Subject Area: Accounting and Finance
• Term: since 2025
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 554712290

We examine the role of media in disseminating sustainability information and in influencing consumers' and employees' perceptions of a firm. As of 2024, the EU mandates sustainability reporting catering to the information needs of not only shareholders but also other stakeholders. One goal of the EU is to enable shareholders and stakeholders to use information for decision-making and to exert pressure on the management to improve sustainability performance. Given that stakeholders other than shareholders usually do not actively search for sustainability information, traditional and modern media outlets might be a central information intermediary for stakeholders enabling any reactions afterward. To this point, there is limited evidence if and how media disseminates and rehashes sustainability information usable for the information needs of distinct stakeholder groups. Prior studies on the impact of mandatory sustainability reporting point to changes in shareholders' or professional stakeholders’ decision-making. However, these groups usually have resources and incentives for gathering and processing sustainability information. By contrast, stakeholders such as private consumers and/or employees are unlikely to process and use information that is not directly provided by an information intermediary like the media. By extending prior experimental studies as well as studies on the dissemination of voluntary sustainability reporting, we provide evidence on a causal impact of sustainability information on traditional and modern media as well as on the moderating effect of the media on consumers’ and employees’ perceptions of firms. We exploit two increases in the provision of sustainability information. First, we exploit the adoption of the Non-Financial Reporting Directive (NFRD), a widespread mandate for sustainability disclosure in Europe. It mandates large listed firms to disclose sustainability information starting in 2017. Firms are required to disclose sustainability information related to at least five distinct categories. Second, we use the expansion of the Asset4 rating coverage in 2017 from Russelll1000 to Russell2000 firms. Since this expansion, Asset4 –one of the largest providers of ESG ratings - has provided standardized ESG ratings not only for the largest listed firms but also for medium-sized listed firms in the US. Using these events, we examine the effect of topic-specific sustainability information provided by firms as well as aggregated sustainability information provided by an external rating agency on the dissemination and processing of sustainability information by traditional and modern media and its impact on perceptions of consumers and employees. To capture media coverage, we use data from traditional newspapers as well as posts on X (formerly known as Twitter). To capture the influence of media on consumers and employees, we examine changes in a firm’s brand reputation and changes in a firm’s employer rating.

• DFG Programme: Research Grants