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Equity market response to natural disasters: Does firm's corporate social responsibility make difference?

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  • Malik, Ihtisham A.
  • Chowdhury, Hasibul
  • Alam, Md Samsul

Abstract

This study investigates the role of corporate social responsibility (CSR) in explaining firms' stock performance in the wake of natural disasters in the United States. Using event study and multivariate regression analyses, we find that market performance of CSR firms is better than that of non-CSR firms when such disasters occur. We also highlight the importance of environmentally friendly practices in driving the performance of CSR firms. Our results indicate that firms practicing environmental CSR are more resilient to such disasters than nonenvironmental CSR firms. Cross-sectional analyses show that such positive market reaction of CSR firms is more pronounced when firms have low financial constraints, low information asymmetry, and high social capital.

Suggested Citation

  • Malik, Ihtisham A. & Chowdhury, Hasibul & Alam, Md Samsul, 2023. "Equity market response to natural disasters: Does firm's corporate social responsibility make difference?," Global Finance Journal, Elsevier, vol. 55(C).
    • Handle: RePEc:eee:glofin:v:55:y:2023:i:c:s104402832200103x
    DOI: 10.1016/j.gfj.2022.100801
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    Keywords

    Corporate social responsibility; Natural disasters; Equity markets; Event study;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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