Understanding how investors respond to different social responsibility communications: an empirical analysis of Japan

Purpose - This study explores the variance in investor responses to the corporate social responsibility (CSR) performance of firms, as influenced by information sources and investor types. Design/methodology/approach - This study applies a short-term event study and cross-sectional analysis with unique CSR datasets obtained from newspaper articles and the Dow Jones Sustainability Index. Findings - Investor reactions are significantly shaped by their sources of information. Individual investors are found to predominantly respond to accessible news announcements, whereas institutional investors show heightened sensitivity to adverse news from both scrutinized sources. Foreign investors, mirroring institutional investors' patterns, uniquely react positively to index additions. Research limitations/implications - Investors’ assessment of CSR activities varies due to the differing sources of information obtained; further, it is affected by the type of investor. Practical implications - The findings guide public relation managers in strategizing CSR communication toward diverse investor types. This includes recommending targeted approaches for Japanese individual investors through newspapers and TV, exercising caution in disseminating adverse news to Japanese institutions, and promoting and justifying CSR actions to foreign investors. It underscores the need for a strategic investor relations frameworks that considers accessibility, literacy, and investors' interests. Originality/value - This study examines the relationship between sources of information for CSR activities and investors’ responses, an area under-represented in the literature. The author uses CSR announcement data, collected from newspapers to make the results more accurate and relevant.