Investor Reactions to Concurrent Positive and Negative Stakeholder News

This paper examines the impact on firm value created by investor reaction to same day news of corporate social responsibility (CSR) and corporate social irresponsibility (CSiR) activities. First, using trading volume, the authors establish that the perceived value of moral capital generated by news involving institutional (e.g., environmental and community) stakeholders is less clear to investors than that of the news involving technical (e.g., customers and employees) stakeholders. Subsequently, the authors analyze abnormal returns from 565 unique firm events—each comprising at least one positive and one negative stakeholder news item. Using signaling theory, the authors demonstrate that news of the number of CSR activities involving institutional groups counteracts the effects of same day CSiR news in an inverted U-shaped fashion. In contrast, they find that news of the number of CSR activities involving technical groups mitigates the effects of same day CSiR news in a U-shaped fashion.