Responsive CSR as damage control and the effect of institutional owner commitment

Steven A. Dennis, Hua-Hsin Tsai and Marc Tony Via

Global Finance Journal, 2025, vol. 67, issue C

Abstract: We examine the use of CSR as damage control (Responsive CSR) after a reputational shock from a securities class action (SCA) lawsuit. We find that CSR scores increase following an SCA lawsuit, and we demonstrate that it is the high reputation firms who raise their CSR scores after the crisis, consistent with reputation repair. We demonstrate the effect is weaker in business-friendly states where the lawsuit is less likely to prevail, and we also demonstrate the effect is weaker when investors have limited ability to influence management. Finally, we demonstrate that it is the firms with long-horizon institutional owners holding considerable stakes in the firm who increase their CSR scores after a SCA lawsuit.

Keywords: Corporate social responsibility; Reputational risk; Institutional ownership (search for similar items in EconPapers)
JEL-codes: D81 G23 K22 M14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:67:y:2025:i:c:s1044028325000894

DOI: 10.1016/j.gfj.2025.101162

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