Are CSR incidents truly bad news?

Abstract We revisit whether disclosures of negative Corporate Social Responsibility (CSR) incidents adversely affect firms' stock prices. While univariate tests reveal significant negative abnormal returns around incident announcements, the effect disappears once firm characteristics, industry, and time‐fixed effects are controlled for. We find no robust evidence that CSR incidents or firms' Environmental, Social, and Governance (ESG) commitments influence stock price reactions on the event day or across broader windows. These results suggest that previously documented negative market responses may be attributable to endogeneity. Our baseline results are consistent with informed trading behavior: short‐sellers do not increase activity in incident‐related stocks relative to either non‐incident firms or ESG‐aligned portfolios.