Vaasan yliopiston opinnäytteet

Laskentatoimen ja rahoituksen yksikkö, 2019

Arkko, Ella

Stock market reaction to CSR and CSI news

Ohjaaja/Valvoja (DI):
Nebojsa Dimic
Kauppatieteiden maisteri
Laskentatoimi ja rahoitus
Master's Degree Programme in Finance
Tutkielman kieli:
The research question of this study revolves around the issues of whether news announced by the media about firms’ corporate social responsible (CSR) and irresponsible (CSI) actions affect firms’ stock prices in a short and in a long period. Furthermore, the thesis also examines, how different ESG-areas, which are environment, social and corporate governance, around CSR and CSI affect stock prices, how the illegality of the action affects, and does it play a role in a which industry a firm operates.

An event study approach is implemented to examine the stock market reaction to the news. To give new academic evidence about stock market reaction to announcement about corporate social responsibility and irresponsibility, the data consists of only European publicly listed firms. Altogether, the data includes 202 news articles that are published between 2000 and 2018. 98 of the articles are about firms’ irresponsible actions and 104 of the articles are about responsible actions.

Consistent with previous studies form the U.S. market, the results indicate that investors do not award firms for their responsible activities, but they do punish firms for their irresponsible actions. When grouping the articles according to ESG-area, only environmental CSI publications are associated with stock decline. Moreover, the study shows that investors punish firms only for their illegal CSI actions, not for CSI actions that do not lead financial sanctions. After categorizing firms according to their industryareas, results show that only firms operating financial or consumer businesses are associated with lower stock prices after CSI announcement.

The findings of the study suggest that investors value irresponsible activities while they do not value firms’ responsible behavior. That is why firms should carefully manage their responsible image and look out for making any mistakes around corporate social responsibility.
Corporate social responsibility, ESG, Stock market reaction, Socially responsible investing
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