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Stock Market Reactions and CSR Disclosure in the Context of Negative CSR Events


Hummel, Katrin; Mittelbach-Hörmanseder, Stéphanie; Rammerstorfer, Margarethe; Weinmayer, Karl (2019). Stock Market Reactions and CSR Disclosure in the Context of Negative CSR Events. SSRN 3467616, University of Zurich.

Abstract

This paper analyses stock market reactions after the occurrence of major negative corporate social responsibility (CSR) events and the possibility of mitigating these effects through the upfront provision of CSR information in firms’ annual reports. For this purpose, we follow a three-step procedure. First, we analyse the major concerns gathered from REPRisk® data via event study analysis. Herein, we cover a window of 5 to 20 days. Second, we analyse all annual reports of the firms mentioned in the covered period over the entire time horizon and conduct a textual analysis to examine firms’ disclosure of CSR information. Finally, we draw conclusions from the two approaches and show that firms with more upfront CSR information suffer from stronger negative market reactions after the occurrence of a negative CSR event. Herein, we show that if the occurrence of a negative CSR event conflicts with investors’ expectations, then it leads to an important update of investors’ beliefs about firms’ prospects. Our results also confirm that such an event leads to an adjustment of the subsequent year’s CSR disclosure in the annual reports.

Abstract

This paper analyses stock market reactions after the occurrence of major negative corporate social responsibility (CSR) events and the possibility of mitigating these effects through the upfront provision of CSR information in firms’ annual reports. For this purpose, we follow a three-step procedure. First, we analyse the major concerns gathered from REPRisk® data via event study analysis. Herein, we cover a window of 5 to 20 days. Second, we analyse all annual reports of the firms mentioned in the covered period over the entire time horizon and conduct a textual analysis to examine firms’ disclosure of CSR information. Finally, we draw conclusions from the two approaches and show that firms with more upfront CSR information suffer from stronger negative market reactions after the occurrence of a negative CSR event. Herein, we show that if the occurrence of a negative CSR event conflicts with investors’ expectations, then it leads to an important update of investors’ beliefs about firms’ prospects. Our results also confirm that such an event leads to an adjustment of the subsequent year’s CSR disclosure in the annual reports.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:27 September 2019
Deposited On:29 Jan 2020 11:42
Last Modified:22 Sep 2023 12:35
Series Name:SSRN
Number of Pages:23
ISSN:1556-5068
OA Status:Green
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.2139/ssrn.3467616
Other Identification Number:merlin-id:19043
  • Content: Published Version