IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v66y2013i10p1852-1860.html
   My bibliography  Save this article

Investor reaction to positive and negative corporate social events

Author

Listed:
  • Groening, Christopher
  • Kanuri, Vamsi Krishna

Abstract

The goal of this research is to provide a basis for understanding under what circumstances there is a match (congruence) between stakeholder and investor reactions to a stakeholder-positive corporate social event (pCSE) and a stakeholder-negative corporate social event (nCSE). Analysis of a unique dataset of more than 1000 pCSEs (e.g., addition of strong retirement benefits for employees) and nCSEs (e.g., employee health and safety concerns) reveals that nearly half of the time, congruence is violated (e.g., pCSE results in a negative return, or nCSE leads to a positive return). The results reflect whether investors believe a CSE is revenue enhancing or an opportunity cost. In other words, there are situations when a stakeholder group views a firm pCSE in a positive light, but investors may not reward the firm, and may even mete out punishment At the same time, there are situations when a firm that faces an nCSE that is viewed negatively by a stakeholder group, may not only receive a non-negative reaction from investors, but also in some cases may be rewarded by investors.

Suggested Citation

  • Groening, Christopher & Kanuri, Vamsi Krishna, 2013. "Investor reaction to positive and negative corporate social events," Journal of Business Research, Elsevier, vol. 66(10), pages 1852-1860.
    • Handle: RePEc:eee:jbrese:v:66:y:2013:i:10:p:1852-1860
    DOI: 10.1016/j.jbusres.2013.02.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296313000301
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2013.02.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert W. Palmatier & Srinath Gopalakrishna & Mark B. Houston, 2006. "Returns on Business-to-Business Relationship Marketing Investments: Strategies for Leveraging Profits," Marketing Science, INFORMS, vol. 25(5), pages 477-493, September.
    2. Edward Nelling & Elizabeth Webb, 2009. "Corporate social responsibility and financial performance: the “virtuous circle” revisited," Review of Quantitative Finance and Accounting, Springer, vol. 32(2), pages 197-209, February.
    3. Jan Lepoutre & Aimé Heene, 2006. "Investigating the Impact of Firm Size on Small Business Social Responsibility: A Critical Review," Journal of Business Ethics, Springer, vol. 67(3), pages 257-273, September.
    4. Jeffrey S. Harrison & Douglas A. Bosse & Robert A. Phillips, 2010. "Managing for stakeholders, stakeholder utility functions, and competitive advantage," Strategic Management Journal, Wiley Blackwell, vol. 31(1), pages 58-74, January.
    5. Basil, Debra & Runte, Mary & Basil, Michael & Usher, John, 2011. "Company support for employee volunteerism: Does size matter?," Journal of Business Research, Elsevier, vol. 64(1), pages 61-66, January.
    6. Adams, Renée B. & Ferreira, Daniel, 2009. "Women in the boardroom and their impact on governance and performance," Journal of Financial Economics, Elsevier, vol. 94(2), pages 291-309, November.
    7. Diego Prior & Jordi Surroca & Josep A. Tribó, 2008. "Are Socially Responsible Managers Really Ethical? Exploring the Relationship Between Earnings Management and Corporate Social Responsibility," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(3), pages 160-177, May.
    8. Jennifer Conrad & Bradford Cornell & Wayne R. Landsman, 2002. "When Is Bad News Really Bad News?," Journal of Finance, American Finance Association, vol. 57(6), pages 2507-2532, December.
    9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    10. Fama, Eugene F., 1998. "Market efficiency, long-term returns, and behavioral finance," Journal of Financial Economics, Elsevier, vol. 49(3), pages 283-306, September.
    11. Hosmer, LaRue Tone & Kiewitz, Christian, 2005. "Organizational Justice: A Behavioral Science Concept with Critical Implications for Business Ethics and Stakeholder Theory," Business Ethics Quarterly, Cambridge University Press, vol. 15(1), pages 67-91, January.
    12. Judith F. Posnikoff, 1997. "Disinvestment From South Africa: They Did Well By Doing Good," Contemporary Economic Policy, Western Economic Association International, vol. 15(1), pages 76-86, January.
    13. Mathur, Lynette Knowles & Mathur, Ike, 2000. "An Analysis of the Wealth Effects of Green Marketing Strategies," Journal of Business Research, Elsevier, vol. 50(2), pages 193-200, November.
    14. Murray, Keith B. & Vogel, Christine M., 1997. "Using a hierarchy-of-effects approach to gauge the effectiveness of corporate social responsibility to generate goodwill toward the firm: Financial versus nonfinancial impacts," Journal of Business Research, Elsevier, vol. 38(2), pages 141-159, February.
    15. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    16. Ran Zhang & Jigao Zhu & Heng Yue & Chunyan Zhu, 2010. "Corporate Philanthropic Giving, Advertising Intensity, and Industry Competition Level," Journal of Business Ethics, Springer, vol. 94(1), pages 39-52, June.
    17. Joachim Vosgerau & Erin Anderson & William T. Ross, Jr., 2008. "Can Inaccurate Perceptions in Business-to-Business (B2B) Relationships Be Beneficial?," Marketing Science, INFORMS, vol. 27(2), pages 205-224, 03-04.
    18. Oded Palmon & Huey-Lian Sun & Alex P. Tang, 1997. "Layoff Announcements: Stock Market Impact and Financial Performance," Financial Management, Financial Management Association, vol. 26(3), Fall.
    19. Amy J. Hillman & Gerald D. Keim, 2001. "Shareholder value, stakeholder management, and social issues: what's the bottom line?," Strategic Management Journal, Wiley Blackwell, vol. 22(2), pages 125-139, February.
    20. Baruch Lev & Christine Petrovits & Suresh Radhakrishnan, 2010. "Is doing good good for you? how corporate charitable contributions enhance revenue growth," Strategic Management Journal, Wiley Blackwell, vol. 31(2), pages 182-200, February.
    21. Paul C. Godfrey & Craig B. Merrill & Jared M. Hansen, 2009. "The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis," Strategic Management Journal, Wiley Blackwell, vol. 30(4), pages 425-445, April.
    22. Robert D. Klassen & Curtis P. McLaughlin, 1996. "The Impact of Environmental Management on Firm Performance," Management Science, INFORMS, vol. 42(8), pages 1199-1214, August.
    23. William Boulding & Richard Staelin, 1995. "Identifying Generalizable Effects of Strategic Actions on Firm Performance: The Case of Demand-Side Returns to R&D Spending," Marketing Science, INFORMS, vol. 14(3_supplem), pages 222-236.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wei Li & Yuan Lu & Weining Li, 2019. "Does CSR Action Provide Insurance-Like Protection to Tax-Avoiding Firms? Evidence from China," Sustainability, MDPI, vol. 11(19), pages 1-19, September.
    2. Thomas Fischer & Angelika Sawczyn, 2013. "The relationship between corporate social performance and corporate financial performance and the role of innovation: evidence from German listed firms," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 24(1), pages 27-52, May.
    3. Byungki Kim & Jinhan Pae & Choong-Yuel Yoo, 2019. "Business Groups and Tunneling: Evidence from Corporate Charitable Contributions by Korean Companies," Journal of Business Ethics, Springer, vol. 154(3), pages 643-666, February.
    4. Saridakis, Charalampos & Angelidou, Sofia & Woodside, Arch G., 2023. "How historical and social aspirations reshape the relationship between corporate financial performance and corporate social responsibility," Journal of Business Research, Elsevier, vol. 157(C).
    5. Li‐Chun Kuo & Chia‐Lin Lee & Yun‐Ting Lee, 2022. "The impact of voluntary assurance of CSR reports on firms' operating performance: Evidence from Taiwan," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 4041-4054, December.
    6. Yunyi Li & Charl de Villiers & Lina Zixuan Li & Leye Li, 2022. "The moderating effect of board gender diversity on the relation between corporate social responsibility and firm value," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 33(1), pages 109-143, March.
    7. Bose, Sudipta & Podder, Jyotirmoy & Biswas, Kumar, 2017. "Philanthropic giving, market-based performance and institutional ownership: Evidence from an emerging economy," The British Accounting Review, Elsevier, vol. 49(4), pages 429-444.
    8. Fernando Gómez-Bezares & Wojciech Przychodzen & Justyna Przychodzen, 2016. "Corporate Sustainability and Shareholder Wealth—Evidence from British Companies and Lessons from the Crisis," Sustainability, MDPI, vol. 8(3), pages 1-22, March.
    9. Christopher Groening & Vamsi K. Kanuri, 2018. "Investor Reactions to Concurrent Positive and Negative Stakeholder News," Journal of Business Ethics, Springer, vol. 149(4), pages 833-856, June.
    10. Hanwen Chen & Siyi Liu & Xin Liu & Daoguang Yang, 2022. "Adversity Tries Friends: A Multilevel Analysis of Corporate Philanthropic Response to the Local Spread of COVID-19 in China," Journal of Business Ethics, Springer, vol. 177(3), pages 585-612, May.
    11. Ilya R. P. Cuypers & Ping-Sheng Koh & Heli Wang, 2016. "Sincerity in Corporate Philanthropy, Stakeholder Perceptions and Firm Value," Organization Science, INFORMS, vol. 27(1), pages 173-188, February.
    12. Yen, Tze-Yu & André, Paul, 2019. "Market reaction to the effect of corporate social responsibility on mergers and acquisitions: Evidence on emerging markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 114-131.
    13. Bill Francis & Iftekhar Hasan & Liuling Liu & Haizhi Wang, 2019. "Employee Treatment and Contracting with Bank Lenders: An Instrumental Approach for Stakeholder Management," Journal of Business Ethics, Springer, vol. 158(4), pages 1029-1046, September.
    14. Ruchunyi Fu & Yi Tang & Guoli Chen, 2020. "Chief sustainability officers and corporate social (Ir)responsibility," Strategic Management Journal, Wiley Blackwell, vol. 41(4), pages 656-680, April.
    15. Alan Muller & Roman Kräussl, 2011. "The Value of Corporate Philanthropy During Times of Crisis: The Sensegiving Effect of Employee Involvement," Journal of Business Ethics, Springer, vol. 103(2), pages 203-220, October.
    16. Franck Brulhart & Sandrine Gherra & Bertrand V. Quelin, 2019. "Do Stakeholder Orientation and Environmental Proactivity Impact Firm Profitability?," Journal of Business Ethics, Springer, vol. 158(1), pages 25-46, August.
    17. Lu Zhang & Yuan George Shan & Millicent Chang, 2021. "Can CSR Disclosure Protect Firm Reputation During Financial Restatements?," Journal of Business Ethics, Springer, vol. 173(1), pages 157-184, September.
    18. Shin, Jiyoung & Moon, Jon Jungbien & Kang, Jingoo, 2023. "Where does ESG pay? The role of national culture in moderating the relationship between ESG performance and financial performance," International Business Review, Elsevier, vol. 32(3).
    19. Yongqiang Gao & Haibin Yang & Taïeb Hafsi, 2019. "Corporate giving and corporate financial performance: the S-curve relationship," Asia Pacific Journal of Management, Springer, vol. 36(3), pages 687-713, September.
    20. Hasan, Iftekhar & Karavitis, Panagiotis & Kazakis, Pantelis & Leung, Woon Sau, 2019. "Corporate Social Responsibility and Profit Shifting," MPRA Paper 91580, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:66:y:2013:i:10:p:1852-1860. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.