Standing out from the crowd via CSR engagement: Evidence from non-fundamental-driven price pressure

68 Pages Posted: 29 Aug 2016 Last revised: 30 Apr 2021

See all articles by Lei Gao

Lei Gao

George Mason University

Jie He

University of Georgia - Department of Finance

J. (Julie) Wu

University of Nebraska - Lincoln

Date Written: April 5, 2021

Abstract

We test the signaling view of corporate social responsibility (CSR) engagement using two complementary quasi-natural experiments that impose non-fundamental-driven negative pressure on stock prices. We find that firms under such price pressure increase CSR activities compared to otherwise similar firms. This effect concentrates among firms with stronger signaling incentives, namely, those facing greater information asymmetry, more product market competition, higher shareholder litigation risk, and higher stock price crash risk. Firms under such price pressure improve CSR strengths, including costly environmental investments. We also find that CSR engagement attracts socially responsible investors and lowers the cost of capital for signaling firms.

Keywords: Corporate Social Responsibility (CSR), ESG, Real Effects of Stock Markets, Regulation SHO, Signaling, Mutual Fund

Suggested Citation

Gao, Lei and He, Jie and Wu, J. (Julie), Standing out from the crowd via CSR engagement: Evidence from non-fundamental-driven price pressure (April 5, 2021). Available at SSRN: https://ssrn.com/abstract=2830742 or http://dx.doi.org/10.2139/ssrn.2830742

Lei Gao

George Mason University ( email )

Fairfax, VA 22030
United States

HOME PAGE: http://sites.google.com/view/lei-gao/home

Jie He

University of Georgia - Department of Finance ( email )

B318 Amos Hall
Terry College of Business, University of Georgia
Athens, GA 30602-6253
United States

J. (Julie) Wu (Contact Author)

University of Nebraska - Lincoln ( email )

Lincoln, NE 68588
United States

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