The Economic and Financial Impact of Negative Environmental and Social Practices: Evidence from Consumers Store Visits

Abstract

Using daily foot-traffic data, we find a significant decrease in firms’ store visits following negative environmental and social (E&S) incidents. The decrease in visits by more E&S-conscious consumers is four times greater than that by less E&S-conscious consumers. Our results are stronger when the incidents are severe; populations are more educated and younger; firms have high E&S ratings and large advertising expenditures; and local product markets are more competitive. Lastly, we find that following E&S incidents, firm sales drop twice as much in more E&S-conscious areas. Our findings suggest that E&S practices can affect firm value via consumers shopping behavior.

Keywords: Environmental and Social Practices, Store Visits, Firm Value

JEL Classification: D12, G30, M14