The Reputation Effect and Value in Corporate Social Responsibility

• Main Authors: Chih-Chuan Tsai, 蔡智全
• Other Authors: Yan-Zhi Wang
• Format: Others
• Language: en_US
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/14169862866623810627

碩士 === 元智大學 === 財務金融學系 === 96 === How and how much the corporate social responsibility (CSR) influences the corporate financial performance (CFP) has long been debated yet still being controversial in the literature. This paper uses an alternative approach to investigate the role of CSR on CFP by examining the additions and deletions from the Dow Jones Sustainability World Index (DJSI World) among a sample of U.S. companies. We hypothesize that being added or deleted from the DJSI World conveys certain information to investors and stakeholders by indicating the relative devotion in CSR events involved in the corporation. As such those being added (deleted) tend to have a positive (negative) impact on CFP in terms of reputation concerns in the short run. We also investigate whether such addition/deletion information will change institutional ownership and analyst coverage. We further conjecture that firms implementing CSR will enhance the value of intangible assets and in turn reflected in the long run market performance. Hence the market performance of the addition groups shall perform better than the deletion firms in the long run. In our empirical studies, we found there is a significant negative cumulative abnormal return in the deletion sample but no significant change in the addition sample, which implies an asymmetric price response to addition and deletion. In addition, there is no significant change in operating performance, institutional ownership and analyst coverage both in the addition or deletion samples. Moreover, there is a significant positive abnormal return in the addition sample from 5 years before to one year after around announcement.