Shareholders’ reaction to Corporate Social Responsibility issues: An event-study of CSR announcements on stock prices
Sammanfattning: This study examines whether shareholders are sensitive to corporations corporate social responsibility announcements. Using the event study methodology and applying it to 234 events of 66 US publicly traded companies in the time period from 2011 to 2016, we try to answer the question whether it is worthwhile for companies to implement social responsible corporate activities into corporation policy. Specifically, we conduct a short-term event study and use the Carhart four-factor model in order to calculate cumulative abnormal returns for the event windows [-1,0], [-1,1] and [-1,2]. Our findings suggest that CSR has a significant effect on capital markets, particularly, negative events decrease stock prices significantly whereas positive events have no significant positive impact. Furthermore, shareholders value offsetting CSR which regard positive CSR news for companies with a history of low CSR-performance. Companies with a history of high CSR-performance however are less penalised for CSR non-conforming behaviour, which suggests that the implementation of effective CSR principles can minimise the effect feared for negative CSR announcements. We therefore conclude that it is worthwhile for companies to invest in CSR.
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