CSR news and stock prices: A fine-grained analysis in an underexamined Muslim setting

Despite considerable efforts to understand the impact of corporate social responsibility (CSR) on corporate financial performance (CFP), findings have remained inconsistent for decades due to the complexity of the CSR-CFP relationship and its context-specific nature. Our study takes a fine-grained approach by examining the connection between CSR news and stock prices. We leverage comprehensive and up-to-date CSR characteristics obtained through content analysis and a novel dataset of 315 CSR events distilled from 14,473 corporate and industrial news items of 38 companies listed in the BIST 100 index of the Istanbul Stock Exchange from 2014 to 2018. We discover that the stock market responds positively to CSR news, with a mean 2-day cumulative abnormal return (CAR) of 0.14 percentage points, roughly equivalent to 9.59 million USD. This response is particularly strong in contexts related to “social CSR,” “external stakeholder focus,” and “new information.” Additionally, cross-sectional analysis indicates that investors are inclined to react favorably to CSR news related to productivity while exhibiting a negative response to international CSR initiatives. Our further analyses uncover that the impact of CSR news is moderated by social capital and institutional ownership and is contingent upon whether the market conditions are characterized as “normal” or “hard.” These findings remain robust after a series of tests. Our results offer insights into how firms should communicate CSR initiatives, implement international or local CSR, and prioritize actions serving the firm.