Corporate Social Responsibility: Are There Financial Incentives?

In the early 2000s, consumer trends increasingly influenced corporations to engage in Corporate Social Responsibility (CSR). More recently, however, this trend has shown signs of reversing, which is puzzling, given that engagement in CSR may lead to enhanced company financial performance through channels of competitive advantage or risk reduction. Using event study methods, I analyze how investors respond to signals in the form of third-party recognitions for companies’ CSR activities. Third-party recognitions, may provide new information, altering investor behaviors and decision making. I find no statistically significant relationship between the announcement of these recognitions and either abnormal stock returns or changes in log stock prices.