| Does sound corporate social responsbility mitigate the negative intra-industry contagion effects?Investor's perception of financial scandal |
Received:October 15, 2017 Revised:October 15, 2017 |
Key Words: Corporate Social Responsibility; Contagion Effect; Financial Scandal; Investor’s Perception; Insurance-Like Protection |
| Author Name | Affiliation | | Haijian Liu* | Nanjing University | | Yusen Dong | Nanjin University |
|
Hits: 534 |
Abstract: |
| This paper studies whether the negative contagion effect exists, that is, when a negative event occurs in a firm(perpetrator),whether other firms in the same industry（bystander）have the same negative effects. What’s more, the paper makes an in-depth study on whether sound corporate social responsibility could mitigate this negative contagion effects. In this paper, we use irregularities in CSMAR database as negative events sample and find that:(1) The financial scandal does have the contagion effect in the industry. (2) Bystander firms who do better corporate social responsibility will have lower negative contagion effect. (3) However, when perpetrator does a better corporate social responsibility, bystander firms will suffer a more negative contagion effect. (4) When perpetrator does better CSR than bystander firms, the bystander firms will suffer an even more negative contagion effect. From the perspective of investors, this paper validates that sound corporate social responsibility will have insurance-like protection for bystander firms when faced a financial misconduct done by other firms in the same industry in China. Based on this finding, this paper also find that whether the insurance-like role of bystander’s CSR make effect is affected by the investors’ comprehensive judgments of perpetrator. Our research conclusions provide a reference and inspiration for firms to face the contagion of a crisis. |
|
|
|
