An Attributional Model of CSR: Market Reactions to Water Actions in Different Stakeholder Domains

Abstract

This study integrates attribution and expectancy violation theory to explain market responses to corporate social responsibility (CSR) actions oriented towards primary and secondary stakeholders. We test our model and hypotheses empirically in the context of responsible corporate water actions. We argue that market reactions are affected by two important factors influencing attributions to a CSR action, the stakeholder orientation of the current action and the stakeholder orientation of prior CSR performance, which each shape shareholder beliefs and expectations regarding the firm’s actions. We find the market reaction to a CSR action affecting primary stakeholders is significantly positive given its direct financial and strategic attributions, but it is not significant for actions affecting secondary stakeholders as these involve ethical or altruistic attributions. We further find that expectancy confirmation or violation moderates these stakeholder orientation effects, influencing how shareholders react to CSR actions. Our study is one of the first to explore market reactions to responsible corporate water actions, and apply both attribution and expectancy violation theory to the novel context of market reactions to CSR actions.