Does Corporate Social Responsibility Reduce Local Bias?
41 Pages Posted: 28 Jun 2017 Last revised: 8 Oct 2017
Date Written: October 7, 2017
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
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