Media coverage of corporate social irresponsibility and firm equity risk

Abstract This study aims to empirically investigate the impact of media coverage of corporate social irresponsibility (CSI) on firm equity risk. I apply two-way fixed effects regression models using a panel dataset covering 6928 listed firms from 20 countries between 2007 and 2021 to empirically assess the impact of CSI media coverage on different types of firm equity risk. Based on daily return data, I calculate firms’ quarterly total (volatility), systematic (beta), unsystematic (idiosyncratic volatility), and crash (down-to-up volatility and negative coefficient of skewness) risk. I find that news articles criticising firms for social, environmental, and governance issues increase total, unsystematic, and crash risk. While the risk-generation effect is largest for CSI coverage in high-reach media, criticism expressed in limited-reach sources, including local media, smaller NGOs, local governmental bodies, and social media, is also statistically significant and economically meaningful. Furthermore, I demonstrate that the risk-generation effect is larger for small firms and for media coverage that includes criticism of governance issues. This is the first study that explicitly explores the impact of CSI media coverage on different types of firm equity risk and hence extends previous research on the risk-generating effect of CSI, which is complementary to the stream of literature about the risk-mitigating effect of corporate social performance.