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Does Corporate Social Responsibility Reduce Local Bias?

41 Pages Posted: 28 Jun 2017 Last revised: 8 Oct 2017

Taylan Mavruk

University of Gothenburg - Centre for Finance - School of Business, Economics and Law

Date Written: October 7, 2017

Abstract

This paper examines the relation between corporate social responsibility (CSR) news releases and local bias. I identify 44 keywords that are used in CSR related research and examine the effects when these words appear in media. Analyses show that CSR news releases reduce firm level local bias, and moreover, that the CSR news is positively related to the firm value. Overall results from the event study suggest that in the short-run of 3 calendar days CSR news predicts negative cumulative abnormal returns (CARs), which turn positive after day 3 and are persistent up to day 7. Certain keywords furthermore consistently predict CARs, some negative others positive, with effects that are persistent up to 5 calendar days. In sum, the results show that firms do NOT seem to suffer financially for engaging in CSR activities.

Keywords: Corporate Social Responsibility, Information Asymmetry, Local Bias, Cumulative Abnormal Returns

JEL Classification: M14, G30

Suggested Citation

Mavruk, Taylan, Does Corporate Social Responsibility Reduce Local Bias? (October 7, 2017). Swedish House of Finance Research Paper No. 17-13. Available at SSRN: https://ssrn.com/abstract=2993745

Taylan Mavruk (Contact Author)

University of Gothenburg - Centre for Finance - School of Business, Economics and Law ( email )

Vasagatan 1
Gothenburg, 40530
Sweden

HOME PAGE: http://www.cff.handels.gu.se/faculty-presentation/taylan-mavruk/

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