Corporate social responsibility and financial performance: event study cases

This paper examines how the U.S. capital market perceives corporate social responsibilities (CSRs) by examining the constituent companies of the Dow Jones Sustainability Index (DJSI) and explores whether the implementation of CSR policies and verification by independent organizations contribute to variances in financial performance . This paper also examines different events (i.e., nominations, inclusions, and awards) in the analysis of how much importance investors place on CSR. The results show that investors do not exhibit significant recognition of U.S. companies included in the DJSI. However, when CSR becomes common practice within a given industry, certification by independent third parties regarding CSR policies conveys actual benefits to corporate performance. In addition, this paper compares degrees of CSR recognition between investors in the United States and investors in Taiwan. This study uses the Awards of Excellence in Corporate Social Responsibility given by Common Wealth Magazine to assess whether investors form different expectations of CSR based on company size. The results indicate that Taiwanese investors are increasingly aware of CSRs and the awards received by mid-sized companies show significant impacts. Changes in share prices for mid-sized companies are slower than for large companies. This paper argues that CSR policies not only enhance reputation but also lead to good financial performance. Companies are encouraged to take an active attitude toward CSR by understanding the relevant costs.