Market Responsiveness to Corporate Social Responsibility

Zev Fried

Abstract


Market reaction to surprises in earnings announcements has long been used to measure the quality of the information content of the announcement, and studies have explored various factors affecting the response. This study adds to this body of research by factoring in the level of corporate social responsibility (CSR) exhibited by the firm and employs a relatively new measure of a company’s level of CSR, rankings published by JUST Capital. I hypothesize that financial information reported by higher ranked companies is weighed more heavily by investors than those reported by non-ranked or lower-ranked companies. Using earnings response coefficients as a measure of the perceived quality of the financial information reported by the firms, my results provide direct support of the hypothesis, indicating that the market reacts more strongly to earnings surprises for firms with high JUST rankings than for unranked firms or firms with lower rankings. This result contributes new insights into the impact of a firm’s CSR in terms of the perceived quality of a firm’s financial reporting.


Full Text:

PDF


DOI: https://doi.org/10.5430/afr.v8n4p114

Refbacks

  • There are currently no refbacks.


Accounting and Finance Research
ISSN 1927-5986 (Print)   ISSN 1927-5994 (Online)

Copyright © Sciedu Press

To make sure that you can receive messages from us, please add the 'Sciedupress.com' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.