Faculty Publications

Responsive CSR as Damage Control and the Effect of Institutional Owner Commitment

Document Type

Article

Keywords

Corporate social responsibility, Institutional ownership, Reputational risk

Journal/Book/Conference Title

Global Finance Journal

Volume

67

Abstract

We examine the use of CSR as damage control (Responsive CSR) after a reputational shock from a securities class action (SCA) lawsuit. We find that CSR scores increase following an SCA lawsuit, and we demonstrate that it is the high reputation firms who raise their CSR scores after the crisis, consistent with reputation repair. We demonstrate the effect is weaker in business-friendly states where the lawsuit is less likely to prevail, and we also demonstrate the effect is weaker when investors have limited ability to influence management. Finally, we demonstrate that it is the firms with long-horizon institutional owners holding considerable stakes in the firm who increase their CSR scores after a SCA lawsuit.

Department

Department of Finance

Original Publication Date

9-1-2025

DOI of published version

10.1016/j.gfj.2025.101162

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