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The informational relevance of corporate social responsibility: evidence from DS400 index reconstitutions
Author(s) -
Ramchander Sanjay,
Schwebach Robert G.,
Staking KIM
Publication year - 2012
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.952
Subject(s) - index (typography) , corporate social responsibility , relevance (law) , event study , quality (philosophy) , business , accounting , economics , social responsibility , industrial organization , microeconomics , public relations , law , political science , computer science , paleontology , philosophy , context (archaeology) , epistemology , world wide web , biology
This study examines the relationship between corporate social responsibility and financial performance by analyzing the intra‐industry wealth impact of additions and deletions to the Domini Social 400 index. Results from the event study analysis indicate that additions to the index generate a positive share price response for the announcement firm and a negative response by rival firms. The opposite reaction is observed for index deletions. Additionally, the share price response is more pronounced for informationally opaque industries. Our study highlights the importance of external monitoring agencies in providing meaningful information that helps resolve investor uncertainty regarding the quality of a firm's relationships with its primary stakeholders. Copyright © 2011 John Wiley & Sons, Ltd.