Terrorist Attack and Corporate Social Responsibility
Posted: 7 Aug 2018 Last revised: 1 Jul 2019
Date Written: July 18, 2018
Using 31 major terrorist attack events occurred in the U.S. during the period from 1994 to 2012 as experiments, this study examines the causal effect of the threat of terrorism on corporate social responsibility (CSR) commitment. Our finding indicates that relative to firms that share similar corporate characteristics but located in control regions without terrorist attacks, public firms located in close proximity to regions with terrorist attacks (i.e., impact firms) increase their investment in CSR substantially following the occurrence of terrorist attacks. We further observe a strengthened association between CSR and firm value for impact firms in period post terrorist events. The finding of a strengthened CSR and firm value relationship is more pronounced when the CSR effort of impact firms is associated with more prominent media attention. Additional results reveal that impact firms tend to commit more resources in enhancing the environment-, community-, and diversity-related dimension of CSR post terrorist events. Overall, our findings support the conjecture that, although firms located in area most impacted by terrorist attacks are likely to experience higher demand for CSR engagement, the value of CSR investment is greater because the CSR efforts of impact firms are likely to attract a greater level of community visibility, especially in period post terrorist events.
Keywords: Terrorist Attacks, CSR, Firm Value, Media Attention, Visibility
JEL Classification: G14, K42, M14
Suggested Citation: Suggested Citation