Investors' Reactions to CSR News in Family vs. Nonfamily Firms: A Study on Signal (In)Credibility
Entrepreneurship Theory and Practice
45 Pages Posted: 29 Mar 2021 Last revised: 12 Jul 2023
Date Written: March 25, 2021
We study family firm status as an important condition in signaling theory; specifically, we propose that the market reacts more positively to positive, and more negatively to negative, CSR news (i.e., signals) from family firms than to similar news from nonfamily firms. Moreover, we propose that during recessions, the direction of these relationships reverses. Based on an event study of 1,247 positive and negative changes in the CSR ratings for all firms listed on the French SFB120 stock market index (2003-2013), we find support for our hypotheses. Moreover, a post hoc analysis reveals that the relationships are contingent on whether a family CEO leads the firm.
Keywords: family firms, signaling theory, corporate social responsibility, market reaction, recession, family CEO
JEL Classification: G30
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