Abstract
International studies on corporate social responsibility and firm value suffer from bias associated with the endogeneity between corporate social responsibility and firm valuation. To address this issue, we use the exogenous shock from COVID-19 related corporate social responsibility announcements to investigate the causal link between corporate social responsibility and firm value. Analyzing COVID-19 related corporate social responsibility announcements of S&P1500 firms from didthehelp.com and the scores from CSRHub, the results show that COVID-19 related corporate social responsibility announcements negatively affect market-adjusted returns on the day of the announcements regardless of the nature of the news. However, the interaction terms between the firm-level corporate social responsibility and the COVID-19 related corporate social responsibility announcements are positive and statistically significant, indicating that the negative price reactions are not as severe for companies with strong corporate social responsibility performance. It is concluded that corporate social responsibility can benefit the firm in time of crisis.
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