Corporate social responsibility and shareholder's value: an empirical analysis

Leonardo Becchetti, Rocco Ciciretti () and Iftekhar Hasan

No 1/2009, Research Discussion Papers from Bank of Finland

Abstract: In today’s global economy, corporate social responsibility (CSR) is a core component of corporate strategy. Due in part to financial scandals, losses, and the diminished reputation of the affected listed companies, CRS is emerging as a crucial instrument for minimizing conflicts with stakeholders. While corporations are busy adopting and enhancing CSR practices, there is (beyond a very few notable exceptions) no established empirical research on its impact and relevance for the capital market. Our paper investigates this issue by tracing market reactions to corporate entry into and exit from the Domini 400 Social Index (a recognized CSR benchmark) between 1990 and 2004. Our paper highlights two main findings: i) a significant upward trend in absolute values of abnormal returns, irrespective of the event (entry/exit vis-à-vis the index) type; and ii) a significant negative effect on abnormal returns after announcement from the Domini index. The latter effect continues to persist even after controlling for concurring financial distress shocks and stock market seasonality.

Keywords: corporate social responsibility; event study (search for similar items in EconPapers)
JEL-codes: D21 G14 L21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec
Date: 2009-01-19
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Working Paper: Corporate social responsibility and shareholder's value: an event study analysis
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