Date of Award
Doctor of Philosophy
Corporate social responsibility (CSR) has moved to the forefront of many firms' concerns and is defined as a firm taking into consideration the interests of society by taking responsibility for the impact of the firm's actions on all stakeholders: customers, employees, shareholders, communities at large, and the environment. This dissertation will look at several public announcements and examine not only the level of corporate social responsibility a firm has but also the effects these announcements have on not only firm value but also customers' reactions to them. The three samples examined in the paper are boycotts announcements, recall announcements, and negative social responsibility announcements. The announcements were separated into the three groups to allow me to better analyze the effects of individual announcements and distinguish between types of announcements. The first part of the study focused on market response, measured by stock reactions and shows that the three samples of event announcements produced inconsistent results. Each of the three events produced the negative short term effects expected, either for Day 0 or for the post event period (+1, +30). However, the significance varied and the control sample for both recalls and boycotts produced positive post announcement results, implying that competitors are positively affected by these announcements. With regards to the control samples, only the general announcements control sample produced negative post announcement implying market wide affects. These test also showed that recalls may be subject more often to leakage. The general findings of this test are as expected though the significance was not. The second part of the study focused on customer's reactions, measured by change in market shares, to the three announcements. I found that no significant effect existed due to any of the three types of announcements, negative CSR announcements, boycotts, and recalls. This can be interpreted as the lack of public response to the announcements studied. These results were then followed up with a regression analysis that put the market share as the dependent variable and `Sample" as one of the independent variables. The purpose was to see if the firms that were subject to an announcement affected market share significantly. With regards to the tests establishing the effects of variables on market share, it was found that the results in all three samples were similar. The Size variable was always among the most significant followed by whether the firm is in its growth stages or mature stages. The Sample variable is the most important variable in the regression and shows that the subject firms did not have the expected effect on market share. For all three samples the Sample variable was not consistently significant but was, in fact, positive. This implies that a negative announcement positively contributes to market share. The implication of these regressions is not necessarily contrary to the event study first completed since the stock market study is observing owners' responses while the market share analysis is studying the customers' response to the same announcements. The final portion of the study shows that KLD is relatively effective at ranking firms, both at the product and firm level. Effective ranking is determined as the firm's lack of need to reassess a firm after an announcement. I find that there is no significant or economic difference in the ranking provided by KLD in the years surrounding the event. However, the regression results in all samples tested did produce the negative reaction in the KLD ranking that was as expected. However, it was only significant in the boycott sample. I conclude that the market reacts minimally to poor CSR and that customer's barks' are worse than their bite.
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