Premium
Corporate social responsibility: An umbrella or a puddle on a rainy day? Evidence surrounding corporate financial misconduct
Author(s) -
Bae John,
Choi Wonik,
Lim Jongha
Publication year - 2020
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12235
Subject(s) - corporate social responsibility , misconduct , wrongdoing , reputation , business , accounting , argument (complex analysis) , social responsibility , stock (firearms) , stock market , monetary economics , finance , public relations , economics , political science , law , mechanical engineering , paleontology , biochemistry , chemistry , horse , biology , engineering
We examine the way a fraudulent firm's pre‐ and post‐misconduct corporate social responsibility engagement is associated with its stock performance to investigate the reputational role of corporate social responsibility (CSR). In the short term, firms with good CSR performance suffer smaller market penalties upon the revelation of financial wrongdoing, supporting the buffer effect, as opposed to the backfire effect, of a good social image. We also find that the misbehaving firms’ post‐misconduct CSR efforts are negatively associated with delisting probabilities, and positively with stock returns. These findings support the argument that increasing post‐crisis CSR engagement can be an effective remedy for a damaged reputation.