Corporate social responsibility, business group affiliation and shareholder wealth: evidence from an emerging market

Article

Velayutham, Eswaran and Ratnam, Vijayakumaran. 2022. "Corporate social responsibility, business group affiliation and shareholder wealth: evidence from an emerging market." Social Responsibility Journal. 18 (4), pp. 723-743. https://doi.org/10.1108/SRJ-08-2020-0337
Article Title

Corporate social responsibility, business group affiliation and shareholder wealth: evidence from an emerging market

ERA Journal ID40462
Article CategoryArticle
AuthorsVelayutham, Eswaran (Author) and Ratnam, Vijayakumaran (Author)
Journal TitleSocial Responsibility Journal
Journal Citation18 (4), pp. 723-743
Number of Pages21
Year2022
PublisherEmerald
Place of PublicationUnited Kingdom
ISSN1747-1117
Digital Object Identifier (DOI)https://doi.org/10.1108/SRJ-08-2020-0337
Web Address (URL)https://www.emerald.com/insight/content/doi/10.1108/SRJ-08-2020-0337/full/html
Abstract

Purpose: This paper aims to examine the relationship between corporate social responsibility (CSR) and shareholder wealth arising from announcement returns of security issuance from a frontier market. It also explores the role of business group affiliation (BGA) on this relationship.

Design/methodology/approach: The study uses short-term scenarios to examine the link between CSR and shareholder wealth using the event study methodology which helps us mitigate the reverse causality problems related to studies of the relationship between CSR and firm value. Abnormal returns surrounding the security issue announcements were generated using the market model.

Findings: This paper finds that security issuers with high CSR scores are associated with higher shareholder value. However, this paper finds that CSR activities of security issuers with BGA are value-destroying which is consistent with the agency perspective of CSR.

Research limitations/implications: This study is limited to only one nascent market, namely the Colombo Stock Exchange.

Originality/value: This study documents that CSR and BGA are important determinants, among others, of stock price reactions to security offerings in emerging markets.

Keywordsagency theory, emerging market, corporate social responsibility, shareholder wealth, event study, business group affiliation, debt-equity issuance
Contains Sensitive ContentDoes not contain sensitive content
ANZSRC Field of Research 2020350201. Environment and climate finance
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Byline AffiliationsSchool of Business
University of Jaffna, Sri Lanka
Institution of OriginUniversity of Southern Queensland
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