Corporate Social responsibility and corporate reputation

SPECIALEFORSVAR ved Carina Murray Elm  

Titel: Corporate Social Responsibility and Corporate Reputation     

 Abstract: A company’s CSR initiatives has an effect on the company’s reputation. However, this relationship is hard to show. Instead one can examine if CSR has an effect on a company’s stock value, and when a company should invest in itself. I analyze the effect on a company’s stock value of being added to or deleted from a socially responsible investment index. I do this by conducting an event study, and find that in the short-run there is a positive correlation between CSR and stock value, but in the long-run I find no clear effect. I then analyze the timing of when a company should invest in its own quality, depending on the level of its own reputation. I find that when the company’s reputation is high the investment incentives are also high, but when the reputation declines the investment incentives disappear. Reputa tion will then keep falling and the company will eventually exit the market. I then expand the model with two cases: one with observable investments and one with privately known quality. Finally I bridge the two extremes of the baseline model and the model with privately known quality, and look at a model with imperfect private information. 

Vejleder:    Peter Norman Sørensen, Ø.I.   
Censor:      Michael H. Juul Stæhr