The Impact of Indirect Corporate Social Performance Signals on Firm Value: Evidence from an Event Study

Abstract

Prior research shows that signals sent by institutionalized third parties (i.e. indirect signals) about firms' corporate social performance (CSP) can impact firm value. However, the effects that different types of indirect CSP signals have on firm value have remained largely unexplored. Furthermore, managers often do not fully understand how to communicate CSP effectively. In this article, we operationalize CSP as a multidimensional construct and draw on signalling theory to examine how different types of indirect CSP signals impact firm value. The results of an event study show that institutionalized third parties can play an important role in delivering credible CSP‐related information to the market. Results also demonstrate that the valence (positivity vs. negativity) and content (the specific social domain) of indirect CSP signals are important predictors of the magnitude of market reactions, and that shareholders' responses to the valence and content of indirect CSP signals have substantially changed over time. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment

Consumer's response to CSR activities: Mediating role of brand image and brand attitude

“…When consumer encounters a brand involved in CSR (2015), Pino et al (2016), Kim and Bae (2016), Boccia and Sarnacchiaro (2017), and Luffarelli and Awaysheh (2018) provide strong evidence to the above fact. When consumer encounters a brand involved in CSR (2015), Pino et al (2016), Kim and Bae (2016), Boccia and Sarnacchiaro (2017), and Luffarelli and Awaysheh (2018) provide strong evidence to the above fact.…”

“…Few studies in the past claim and suggest that CSR has substantial effect when it comes to purchasing decision, brand choice, recommending the brand to others, or firm value (Boccia & Sarnacchiaro, 2017;Luffarelli & Awaysheh, 2018;Salmones, Crespo, & Bosque, 2005;Sen & Bhattacharya, 2001;Werther Jr & Chandler, 2005). Contrary to these claims, some studies have established that CSR does not influencing the purchase decisions made by consumers (Castaldo, Perrini, Misani, & Tencati, 2009;Chomvilailuk & Butcher, 2010).…”

How market value relates to corporate philanthropy and its assurance. The moderating effect of the business sector

“…These committees supervise the company's corporate philanthropy (Dias et al, ; Mahmood et al, ) and sustainability reporting (Fernández‐Sánchez, Luna‐Sotorrio, & Baraibar‐Diez, ), thus ensuring that users are given high‐quality, reliable, and credible information (Fuente, García‐Sánchez, & Lozano, ; Luffarelli & Awaysheh, ). Their actions can be a signal to investors of stakeholder integration and the safeguarding of stakeholder interests in the company's decision‐making process (Frías‐Aceituno, Rodríguez‐Ariza, & Sánchez‐García, ; Godos‐Díez, Cabeza‐García, Alonso‐Martínez, & Fernández‐Gago, ).…”

“…In this respect, sector can be a factor that can influence the management of corporate philanthropy and how it is perceived by stakeholders, thereby affecting its market value (Groening & Kanuri, ; Luffarelli & Awaysheh, ). Therefore, sector can moderate the relationship between the company's corporate philanthropy and its financial performance.…”

Communicating environmental management certification: Signaling without signals?

“…One of these approaches adopting the perspective of decentralized institutions and signaling models (King, Lenox, & Terlaak, ; Montiel, Husted, & Christmann, ; Terlaak & King, ) focused on the role of certifiable environmental meta‐standards in the elimination of information asymmetries between suppliers and customers. Environmental meta‐standards, such as ISO 14001 and EMAS, can be seen as observable and meaningful signals of supplier characteristics that lower search and monitoring costs for customers and resolve information asymmetries (Luffarelli & Awaysheh, ). According to Terlaak and King (), environmental meta‐standards represent a form of private decentralized institution where a wide variety of stakeholders can participate voluntarily, rather than a single central authority, where participation is rewarded.…”