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

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

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.

Suggested Citation

  • Dennis, Steven A. & Tsai, Hua-Hsin & Via, Marc Tony, 2025. "Responsive CSR as damage control and the effect of institutional owner commitment," Global Finance Journal, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:glofin:v:67:y:2025:i:c:s1044028325000894
    DOI: 10.1016/j.gfj.2025.101162
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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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