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Corporate social irresponsibility and shareholder value

Li, Q. (2017) Corporate social irresponsibility and shareholder value. PhD thesis, University of Reading

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Abstract/Summary

This thesis attempts to make original contributions by addressing the empirical relationship between corporate social irresponsibility (CSiR) and shareholder value grounded on separate research purposes and paradigms. The first essay directly links CSiR activities to reputation risk. Using a large sample of 7,442 companies spread over 44 countries, this study investigates the differences between portfolios of stocks exposed to high and low reputation risk across developed and developing countries. The main results indicate that stocks with low reputation risk earn higher abnormal returns than stocks with high reputation risk after controlling for well-known risk factors. This research also finds that differences in terms of abnormal returns between high and low reputation risk portfolios are more significant in developing countries than in developed countries, and the differences are more significant in non-financial sectors than in financial sectors. The second essay examines the impact of CSiR behaviour on long-run abnormal returns in China. This study builds calendar-time portfolios consisting of Chinese stocks engaged in a wide range of CSiR issues and compares the financial performance between news coverage periods and no-news coverage periods. The main findings suggest that the companies involved in corporate governance and product-related controversies suffer the most in shareholder value destruction. The results also show that the effects of CSiR behaviour on shareholder value are contingent on and moderated by factors, such as firm characteristics, investor types, news characteristics, and market environments. The third essay extends the research topic to the environmental, social, and governance (ESG) disclosure which measures the transparency levels of companies’ reporting on ESG-related information. Using a large US sample, this essay investigates whether higher transparency on ESG disclosure provides insurance-like protection for firms involved in CSiR activities. Although there is no explicit protection for high ESG disclosure companies, the results show that the market more likely penalises low ESG disclosure companies. In addition, the results indicate that the moderating effect is more pronounced in corporate governance dimensions, large firms, consumer sectors, and periods after the financial crisis.

Item Type:Thesis (PhD)
Thesis Supervisor:Hoepner, A. and Bell, A.
Thesis/Report Department:Henley Business School
Identification Number/DOI:
Divisions:Henley Business School > ICMA Centre
ID Code:78138

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