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
Date Written: April 5, 2021
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: Suggested Citation