Stock Market Reactions and CSR Disclosure in the Context of Negative CSR Events

23 Pages Posted: 21 Oct 2019

See all articles by Katrin Hummel

Katrin Hummel

University of Zurich

Stephanie Mittelbach-Hoermanseder

WU Vienna

Margarethe Rammerstorfer

Vienna University of Economics and Business - Department of Corporate Finance

Karl Weinmayer

Modul University Vienna - Department of International Management; Vienna University of Economics and Business - Institute for Finance, Banking and Insurance

Date Written: September 27, 2019

Abstract

This paper analyses stock market reactions after the occurrence of major negative corporate social responsibility (CSR) events and the possibility of mitigating these effects through the upfront provision of CSR information in firms’ annual reports. For this purpose, we follow a three-step procedure. First, we analyse the major concerns gathered from REPRisk® data via event study analysis. Herein, we cover a window of 5 to 20 days. Second, we analyse all annual reports of the firms mentioned in the covered period over the entire time horizon and conduct a textual analysis to examine firms’ disclosure of CSR information. Finally, we draw conclusions from the two approaches and show that firms with more upfront CSR information suffer from stronger negative market reactions after the occurrence of a negative CSR event. Herein, we show that if the occurrence of a negative CSR event conflicts with investors’ expectations, then it leads to an important update of investors’ beliefs about firms’ prospects. Our results also confirm that such an event leads to an adjustment of the subsequent year’s CSR disclosure in the annual reports.

Keywords: Capital Markets, Corporate Social Responsibility, CSR disclosure, Event Study, Textual Analysis

JEL Classification: G12, G14, G15, G24, M14, M41, D21, L21, D84

Suggested Citation

Hummel, Katrin and Mittelbach-Hoermanseder, Stephanie and Rammerstorfer, Margarethe and Weinmayer, Karl, Stock Market Reactions and CSR Disclosure in the Context of Negative CSR Events (September 27, 2019). Available at SSRN: https://ssrn.com/abstract=3467616 or http://dx.doi.org/10.2139/ssrn.3467616

Katrin Hummel (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zurich, CH-8006
Switzerland

Stephanie Mittelbach-Hoermanseder

WU Vienna ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Margarethe Rammerstorfer

Vienna University of Economics and Business - Department of Corporate Finance ( email )

Welthandelsplatz 1
1020 Vienna
Austria

Karl Weinmayer

Modul University Vienna - Department of International Management ( email )

Am Kahlenberg 1
Vienna, 1190
Austria
+43-1-3203555-653 (Phone)

Vienna University of Economics and Business - Institute for Finance, Banking and Insurance ( email )

Welthandelsplatz 1
Building D4, 4th floor
Vienna, 1020
Austria

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