How do Corporate Social Responsibility announcements affect firm value?

Abstract

Taking previous research on this topic into consideration, this thesis sets out to give some insights as to why there seems to be increasing focus on Corporate Social Responsibility (CSR) initiatives by firms. Using theory from business ethics, CSR, investor behaviour and finance as a base, we try to answer how CSR announcements made by listed firms in the U.S. affect its firm value, hereunder stock returns. After conducting an event study, similar to the approach of Elton, Gruber, Brown and Goetzmann (2014), we find no overall significant evidence that CSR announcements affect stock returns. However, when expanding the analysis by adding business sectors, our results view firms in the financial, services and basic materials sector to experience a significantly negative effect on firm value when announcing CSR initiatives.