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Physical proximity, corporate social responsibility, and the impact of negative investor sentiment on stock returns: Evidence from COVID‐19 in China

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  • Huayun Zhai
  • Mingsheng Xiao
  • Kam C. Chan
  • Qingzhuo Liu

Abstract

Using the Hubei province in China as the COVID‐19 pandemic epicenter and January 23, 2020 as the event date (the date the Chinese government announced the lockdown of Wuhan, the provincial capital), we document that while Chinese firms generally exhibited negative cumulative abnormal returns (CARs) around the event date, firms located far from the Hubei province experienced relatively less adverse impact by way of negative CARs than firms located close to and in the province. Moreover, firms that engaged strongly in corporate social responsibility (CSR) activities in terms of corporate donations prior to the event date experienced less of an adverse impact than those with no or weak CSR activities, suggesting that CSR serves an insurance‐like function that alleviates the adverse impact on stock returns precipitated by the negative investor sentiment stemming from COVID‐19.

Suggested Citation

  • Huayun Zhai & Mingsheng Xiao & Kam C. Chan & Qingzhuo Liu, 2022. "Physical proximity, corporate social responsibility, and the impact of negative investor sentiment on stock returns: Evidence from COVID‐19 in China," International Review of Finance, International Review of Finance Ltd., vol. 22(2), pages 308-314, June.
    • Handle: RePEc:bla:irvfin:v:22:y:2022:i:2:p:308-314
    DOI: 10.1111/irfi.12343
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    References listed on IDEAS

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    5. Yang, Shou-Lin & Chang, Ariana & Chen, Yen-Hsun & Shiu, Yung-Ming, 2019. "Can country trade flows benefit from improved corporate social responsibility ratings?," Economic Modelling, Elsevier, vol. 80(C), pages 192-201.
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    Cited by:

    1. Chaohai Shen & Bingquan Fang & Xiaolan Zhou, 2022. "The Relationship between Corporate Sustainable Development Performance, Investor Sentiment, and Managerial Overconfidence," Sustainability, MDPI, vol. 14(17), pages 1-19, August.
    2. Imen Khanchel & Naima Lassoued & Rym Gargoury, 2023. "CSR and firm value: is CSR valuable during the COVID 19 crisis in the French market?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(2), pages 575-601, June.

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