Terrorist Attack and Corporate Social Responsibility

Posted: 7 Aug 2018 Last revised: 1 Jul 2019

See all articles by Trung K. Do

Trung K. Do

National Central University at Taiwan - Department of Finance

Henry Hongren Huang

National Central University at Taiwan

Albert Tsang

York University - Schulich School of Business

Date Written: July 18, 2018

Abstract

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

Do, Trung K. and Huang, Henry Hongren and Tsang, Albert, Terrorist Attack and Corporate Social Responsibility (July 18, 2018). Available at SSRN: https://ssrn.com/abstract=3215766 or http://dx.doi.org/10.2139/ssrn.3215766

Trung K. Do (Contact Author)

National Central University at Taiwan - Department of Finance ( email )

No. 300, Zhongda Rd., Zhongli District
Taoyuan, 32001
Taiwan

Henry Hongren Huang

National Central University at Taiwan ( email )

No. 300, Zhongda Road
Chung-Li Taiwan, 32054
Taiwan

Albert Tsang

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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