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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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    More about this item

    Keywords

    Corporate social responsibility; Corporate sustainability; Agency costs; Event study; Corporate governance;
    All these keywords.

    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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