Abstract
PurposeBased on the premises of the institutional theory, in this paper, we explore the effects that the media coverage of positive and negative Corporate Social Responsibility (CSR) news have on the stock market value of companies in diverse industries.Design/methodology/approachUsing a sample of 195 online articles published in the most important Spanish business newspaper, we implement an event study and a regression analysis.FindingsThe findings show that positive and negative CSR news, usually, have significant impacts on the stock market value of companies. Specifically, the market reaction is stronger under the announcement of negative news in all industries (i.e. basic, energy, finance and goods and services), although positive news also cause significant positive stock market reactions in the finance and basic industries.Originality/valueAlthough the media plays an indispensable role in the dialogue around CSR, much of the research focused on the role of the media on the CSR-CFP link does not consider how the industry variable can affect the abnormal stock returns derived from CSR news. This research contributes to this gap in the literature by exploring the differences that exist in the stock market reactions to CSR news based on the industry in which the companies operate.
Highlights
Corporate Social Responsibility (CSR) has received considerable scholarly attention over the decades, becoming an integral part of business practice (Casado-Díaz et al, 2014)
Based on the principles of the institutional theory, this research has explored the relationship that exists between media coverage of corporate social responsibility (CSR) and corporate financial performance (CFP) along with the role that industry plays in the CSR-CSR and financial performance (CFP) link
The empirical study undertaken in this research demonstrates that while positive news usually have a positive impact on the abnormal returns experienced by companies, news including negative connotations always have a negative effect on these market reactions
Summary
Corporate Social Responsibility (CSR) has received considerable scholarly attention over the decades, becoming an integral part of business practice (Casado-Díaz et al, 2014). One primary reason for its relevance in academic and business settings relates to the positive effects of CSR on the financial performance of companies (CFP), especially when CFP is evaluated through market-based measures (Casado-Díaz et al, 2014; Clacher and Hagendorff, 2012; Flammer, 2013; López-Arceiz et al, 2018; Verbeeten et al, 2016) Under this premise, scholars have paid a special attention to the role of the media in the generation of stock market value based on the CSR action plans of companies (Gregory et al, 2014; Li et al, 2017; Tang, 2012; Zhang and Swanson, 2006). The day that Martin Winterkorn, President of the Administration Counsel of the German Volkswagen, publicly admitted that the company had falsified data on the emission of pollutant gases from its cars in the US, Volkswagen’s share price fell 32% in the Dow Jones
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