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Atlanta Fed Working Papers


Corporate Social Responsibility and Shareholder's Value: An Event Study Analysis

Leonardo Becchetti, Rocco Ciciretti, and Iftekhar Hasan
Working Paper 2007-6
April 2007

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Corporate social responsibility (CSR) is increasingly a core component of corporate strategy in the global economy. In recent years its importance has become even greater, primarily because of the financial scandals, investors’ losses, and reputational damage to listed companies. While corporations are busy adopting and enhancing CSR practices, there is (beyond very few notable exceptions) no established empirical research on CSR’s impact and relevance in the capital market. This paper investigates this issue by tracing the market reaction to corporate entry and exit from the Domini 400 Social Index, recognized as a CSR benchmark, between 1990 and 2004. The paper highlights two main findings: a significant upward trend in absolute value abnormal returns, irrespective of the type of event (for example, addition or deletion from the index), and a significant negative effect on abnormal returns after exit announcements from the Domini index. The latter effect persists even after controlling for concurring financial distress shocks and stock market seasonality.

JEL classification: G14, D21, L21

Key words: corporate social responsibility, event study


The authors thank Tiziana Croce for valuable research assistance. The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.

Please address questions regarding content to Leonardo Becchetti, Department of Economics, University of Roma Tor Vergata, Via Columbia, 2, 00133 Rome, Italy, 39 06 72595706, 39 06 2020500 (fax), becchetti@economia.uniroma2.it; Rocco Ciciretti, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8873, 404-498-8810 (fax), rocco.ciciretti@atl.frb.org; or Iftekhar Hasan, Lally School of Management, Rensselaer Polytechnic Institute, 110 8th Street, Troy, NY 12180-3590, 518-276-2525, 518-276-8661 (fax), hasan@rpi.edu.

For further information, contact the Public Affairs Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309-4470, 404-498-8020.