SKEMA Business School, U. Côte d’Azur (GREDEG), France
While controversial practices in organizations often trigger penalties from stakeholders, some practices persist and even thrive despite their contentious nature. This study examines how expert intermediaries—specifically financial analysts—evaluate and potentially legitimize controversial practices, challenging existing assumptions about uniformly negative stakeholder responses. Using Special Purpose Acquisition Companies (SPACs) as our empirical context, we analyze 135,524 analyst forecasts covering 289 SPAC and 728 IPO firms from 2004-2022. Contrary to prevailing theory suggesting that controversial practices trigger stakeholder penalties, we find that analysts systematically issue more optimistic forecasts for SPAC firms compared to traditional IPO firms. However, this optimism diminishes as analysts accumulate direct experience with SPACs, suggesting that stakeholder evaluations of controversial practices evolve through learning. Our findings advance theory by revealing how expert intermediaries' initial support can help sustain controversial practices, while showing how different types of expertise—general market knowledge versus practice-specific experience—shape stakeholder evaluations in distinct ways. These insights extend our understanding of how controversial practices gain and maintain legitimacy despite apparent opposition from key stakeholders.
