Would immaterial CSR performance influence investors’ investment decisions when firms have unfavorable financial performance? An experiment

Purpose This study aims to investigate whether and how individual investors respond to a company’s immaterial corporate social responsibility (CSR; i.e. CSR unrelated to core operations) performance when the company has unfavorable financial performance. Furthermore, it examines whether such an effect of immaterial CSR performance is moderated by explicit assessment of the company’s CSR. Design/methodology/approach This study uses a 3 × 2 between-participants experimental design using a survey administered through Qualtrics. The sample consists of 120 participants recruited via Amazon Mechanical Turk (MTurk). Data was analyzed using ANOVA, simple effects testing and moderated mediation analysis (Hayes PROCESS). Findings This study shows that when a company has unfavorable financial performance, investors make similar investment decisions when the immaterial CSR performance is positive versus neutral. However, negative immaterial CSR performance leads to more negative investment decisions, compared to neutral immaterial CSR performance but only when explicit assessment on CSR performance is absent. Practical implications According to the findings of this study, when a company undergoes unfavorable financial situation, investors are less likely to respond to the company’s immaterial CSR performance. Management should focus more on allocating limited resources to improve the company’s financial value. Originality/value Extant studies have paid limited attention to understanding whether and how investors’ judgments and decision-making can be impacted by a company’s immaterial CSR performance when the company has unfavorable financial performance. This study extends prior work on investors’ responses to CSR performance information by demonstrating a boundary condition, financial underperformance, that moderates the role of immaterial CSR.