Stakeholders and the Stock Price Crash Risk: What Matters in Corporate Social Performance?

30 Pages Posted: 6 Jan 2019

See all articles by Ariadna Dumitrescu

Ariadna Dumitrescu

ESADE Business School

Mohammed Zakriya

ESADE Business School, Ramon Llull University

Date Written: December 21, 2018

Abstract

This paper provides evidence on the differential impacts of corporate social responsibility (CSR) initiatives, targeted at different stakeholder groups, on stock price crash risk. Our results reveal that the managerial bad news hoarding and its resultant stock crashes are largely determined by the social CSR dimension. The easy availability of broad-based governance information, and contrastingly obscure nature of environmental initiatives make the corresponding governance and environmental dimensions trivial to stock crashes. Moreover, only those social CSR subcategories that are aimed at specific stakeholder groups (such as the community, employees or customers) tend to mitigate future crashes. Applying dynamic panel regressions and a quasi-natural experiment, our analyses confirm that these effects on crash risk are likely to be causal.

Keywords: CSR, ESG, Crash Risk, Social Performance, Environmental Performance

JEL Classification: G14, G30, M14, Q50

Suggested Citation

Dumitrescu, Ariadna and Zakriya, Mohammed, Stakeholders and the Stock Price Crash Risk: What Matters in Corporate Social Performance? (December 21, 2018). Available at SSRN: https://ssrn.com/abstract=3305213 or http://dx.doi.org/10.2139/ssrn.3305213

Ariadna Dumitrescu

ESADE Business School ( email )

Av. Pedralbes 60-62
Barcelona, 08034
Spain

Mohammed Zakriya (Contact Author)

ESADE Business School, Ramon Llull University ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

HOME PAGE: http://www.esade.edu/research-webs/eng/gref

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