In the Crossfire : Multinational Companies and Consumer Boycotts

Multinational firms face challenges as geopolitical tensions are rising when stakeholders such as customers, employees and owners may have divergent views on contentious issues. Sharply different attitudes toward the proposed extradition law by the Hong Kong SAR Government in 2019 and related issues were observed among some residents in mainland China and Hong Kong. While firms such as Cathay Pacific Airways expressed support of the government, it was perceived by some of its customers in mainland China that the firm was hostile to them due to the views expressed by some of its staff based in Hong Kong. In this paper, we estimate the impact of such perceived divergent staff political attitudes on consumer demand. Using a triple differences design that controls for changes in market demand and supply conditions, we find that passenger volumes from mainland China were adversely affected for Cathay Pacific, leading to a monthly decrease of approximately 20%, after contentious political views of some of its staff were widely reported in mainland China. This is consistent with the hypothesis that firms are adversely affected by the perceived divergence in the staff and customer values. However, the negative effects are temporary and subside within a quarter