Stock Market Reactions and Corporate Social Responsibility (CSR) Disclosure in the Context of Negative CSR Events

47 Pages Posted: 21 Oct 2019 Last revised: 5 Dec 2020

See all articles by Katrin Hummel

Katrin Hummel

WU Vienna University of Economics and Business

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: December 4, 2020

Abstract

This paper analyses stock market reactions to major negative corporate social responsibility (CSR) events. In that context, it also examines whether disclosing CSR information in the annual reports helps firms mitigate the negative effects of subsequent events. To this end, we followed a three-step procedure. First, applying the methodology of event studies, we collected and analyzed data on the major CSR events logged in the REPRisk® database. Second, we used textual analysis to examine topic-specific CSR disclosure in the annual reports of all firms in our sample. Our data cover the period 2011 - 2014. Our results show that stock markets react significantly negative to the occurrence of negative CSR events. Firms whose annual reports disclose more CSR information before an adverse CSR event occurs are better protected against these negative market reactions. Specifically, we show that markets react more positively to firms with a stronger upfront CSR disclosure. Our results also partly show that firms adjust their subsequent CSR disclosure in the annual report that follows a negative CSR event.

Keywords: Market reactions, CSR disclosure, CSR event, Event study, Textual analysis, Abnormal returns, Shareholder value

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 Corporate Social Responsibility (CSR) Disclosure in the Context of Negative CSR Events (December 4, 2020). Available at SSRN: https://ssrn.com/abstract=3467616 or http://dx.doi.org/10.2139/ssrn.3467616

Katrin Hummel (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

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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