Investor reaction to positive and negative corporate social events

摘要

The goal of this research is to provide a basis for understanding under what circumstances there is a match (congruence) between stakeholder and investor reactions to a stakeholder-positive corporate social event (pCSE) and a stakeholder-negative corporate social event (nCSE). Analysis of a unique dataset of more than 1000 pCSEs (e.g., addition of strong retirement benefits for employees) and nCSEs (e.g., employee health and safety concerns) reveals that nearly half of the time, congruence is violated (e.g., pCSE results in a negative return, or nCSE leads to a positive return). The results reflect whether investors believe a CSE is revenue enhancing or an opportunity cost. In other words, there are situations when a stakeholder group views a firm pCSE in a positive light, but investors may not reward the firm, and may even mete out punishment At the same time, there are situations when a firm that faces an nCSE that is viewed negatively by a stakeholder group, may not only receive a non-negative reaction from investors, but also in some cases may be rewarded by investors.