Stock Market and Corporate Social Responsibility: A Long-Run Analysis of the Major Industrial Crises
43 Pages Posted: 5 Nov 2012
Date Written: January 25, 2012
The aim of this paper is to determine the extent to which major industrial crises have a long-run effect on shareholder wealth. We add to the previous evidence that such crises can have a short-term negative impact on stock prices. The long-term effect is important because institutional investors, which own the majority of shares, generally have long investment horizons. Accordingly, they will be mainly concerned by corporate social responsibility (CSR) if it can be linked to a persistent effect on stock prices. We analyze the main industrial crises over half a century, a period of time that allows us to determine if the emergence of CSR consciousness has increased investors’ sensitivity to crises. We find that crises have a long-run impact on shareholders’ wealth, particularly in sectors where consumers can easily switch to competing companies, and when the crises are followed by government intervention.
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