Media Approval: A Crucial Mediator in Linking Corporate Social Performance to Financial Performance

Given the intricate linkages between corporate social and financial performance, this study focuses on media as an underexplored secondary stakeholder and develops a framework to examine how media approval enables firms’ transformation of corporate social performance (CSP) into improved corporate financial performance (CFP). Specifically, we posit that CSP increases media approval at a decreasing rate and that such media approval positively mediates the CSP-CFP relationship. Additionally, given the importance of political legitimacy in emerging economies, we also suggest that both the CSP-media approval relationship and the mediation effect of media approval on the CSP-CFP relationship weaken when a firm holds high political legitimacy. Our research also offers insights for managers in emerging economies to recognize the pivotal roles of media and political legitimacy in shaping how a firm’s CSP translates into financial performance. A nuanced understanding of the distinct roles played by media approval and political legitimacy will assist firms in navigating uncertainties, effectively managing and retaining favorable stakeholder relationships, and fostering stakeholder reciprocity. Our analysis of a panel dataset of 2,008 publicly listed Chinese firms between 2010 and 2019 lends support to our arguments.