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Corporate goodness and shareholder wealth

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  • Krüger, Philipp

Abstract

Using a unique data set, I study how stock markets react to positive and negative events concerned with a firm׳s corporate social responsibility (CSR). I show that investors respond strongly negatively to negative events and weakly negatively to positive events. I then show that investors do value “offsetting CSR,” that is positive CSR news concerning firms with a history of poor stakeholder relations. In contrast, investors respond negatively to positive CSR news which is more likely to result from agency problems. Finally, I provide evidence that CSR news with stronger legal and economic information content generates a more pronounced investor reaction.

Suggested Citation

  • Krüger, Philipp, 2015. "Corporate goodness and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 115(2), pages 304-329.
  • Handle: RePEc:eee:jfinec:v:115:y:2015:i:2:p:304-329
    DOI: 10.1016/j.jfineco.2014.09.008
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Loipersberger, Florian, 2017. "The Effect of Supranational Banking Supervision on the Financial Sector: Event Study Evidence from Europe," Discussion Papers in Economics 34610, University of Munich, Department of Economics.
    2. repec:eee:corfin:v:51:y:2018:i:c:p:332-351 is not listed on IDEAS
    3. Gao, Lei & Zhang, Joseph H., 2015. "Firms’ earnings smoothing, corporate social responsibility, and valuation," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 108-127.
    4. repec:gam:jsusta:v:10:y:2018:i:7:p:2277-:d:155672 is not listed on IDEAS
    5. Ormazabal, Gaizka, 2018. "The Role of Stakeholders in Corporate Governance: A View from Accounting Research," CEPR Discussion Papers 12775, C.E.P.R. Discussion Papers.
    6. Jie Chen & Xicheng Liu & Wei Song, 2018. "CEO general managerial skills and corporate social responsibility," Working Papers 2018-16, Swansea University, School of Management.

    More about this item

    Keywords

    Corporate social responsibility; Corporate sustainability; Agency costs; Event study; Corporate governance;

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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