Misdeeds Matter: Long-Term Stock Price Performance after the Filing of Class-Action Lawsuits

Bauer, Rob; Braun, Robin

doi:10.2469/faj.v66.n6.6

Cited by 18 publications

(6 citation statements)

References 34 publications

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“…However, investors can engage with companies in other ways as well. They can also file shareholder proposals themselves, start private engagement talks individually or in a collaborate fashion (Becht, Franks, Mayer, & Rossi, 2009), use the media (e.g., “just vote no campaigns”), or file class action lawsuits (Bauer & Braun, 2010). However, relatively few institutional investors use these tools to the full extent, and the effectiveness of their efforts is not measured in most cases.…”

Section: How and Why Do Investors Incorporate Esg Information?mentioning

confidence: 99%

Sustainable Development and Financial Markets

2015

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This article explores the role of financial markets for sustainable development. More specifically, the authors ask to what extent financial markets foster and facilitate more sustainable business practices. The authors highlight that their current role is rather modest and conclude that, on the old paths, a paradoxical situation exists. On one hand, financial market participants increasingly integrate environmental, social, and governance (ESG) criteria into their investment decisions, whereas on the other hand, in terms of organizational reality, there seems to be no real shift toward more sustainable business practices. The authors identify two main challenges within the field of sustainable investments that are relevant for entering new avenues that may help overcome this situation. First, a reorientation toward a long-term paradigm for sustainable investments is important. Second, ESG data must become more trustworthy. From a theoretical point of view, the authors finally highlight the potential market consequences when ESG investment criteria are used.

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Section: How and Why Do Investors Incorporate Esg Information?mentioning

confidence: 99%

Sustainable Development and Financial Markets

2015

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“…In another stream of studies, Karpoff et al (2005) analyzed the impact of environmental violations on equity valuation and also found that the decrease in shareholder value approximated direct costs. Other areas of significant events examined include catastrophic events (Humphrey et al, 2016;Knight & Pretty, 1999) and organizational misdeeds (Amiram et al, 2018;Bauer & Braun, 2010;Davidson & Worrell, 1992;Karpoff, 2012) where reputational penalties were more significant and sharp. In general, these studies point to a potential relationship between shareholder loss and management's responsibility for the event.…”

Section: Prior Research and Hypothesesmentioning

confidence: 99%

“…Prior research has examined the effects of significant events on shareholder value, including data breaches (Campbell et al, 2003;Tanimura & Wehrly, 2015), product recalls (Barber & Darrough, 1996;Davidson & Worrell, 1992), environmental violations (Karpoff et al, 2005), catastrophic events (Humphrey et al, 2016;Knight & Pretty, 1999), organizational misdeeds (Bauer & Braun, 2010), corporate illegalities (Davidson & Worrell, 1988), and fraudulent financial reporting and other forms of misconduct (Amiram et al, 2018). Researchers extended the review of unfavorable corporate events to investigate the implications of firm characteristics prior to the event on shareholders' wealth.…”

mentioning

confidence: 99%

An examination of management responsibility in shock events on shareholders’ wealth and reputation‐repair actions to rebound losses

Buzinkai

El-Gazzar

2021

Rev Financ Econ

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Prior research in corporate shock events has extensively examined the consequences of catastrophic events with greater emphasis on the results and general management response actions. Current literature lacks (to the best of the authors' knowledge) evidence on the impact of management attributed responsibility on shareholders' wealth and reputationrepair actions. In this paper, we use a sample of corporate shock events, with attributed-firm responsibility ranging from weak to strong and investigate: (a) the effects of firm responsibility for the event on shareholders' value, and (b) the reputation-repair actions firms pursue to mitigate losses. This study extends prior research on corporate shock events by measuring the incremental effects of attributed-firm responsibility in shock events and the reputation-repair actions taken by firms.

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“…If these increments of insiders' wealth outweigh the opportunity costs of not being able to pursue profitable insider trading strategies, it will be in the managers' interest to increase their company's involvement in CSR. In addition, CSR-conscious managers are less likely to be at risk of being replaced by a more efficient and ethical successor should they trade in nonpublic information, which could potentially lead to a lawsuit against them (Bauer & Braun, 2010).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Asymmetric Information and Corporate Social Responsibility

2015

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This article addresses the question whether companies benefit from their commitment to corporate social responsibility (CSR). The authors argue that firms which score high on CSR activities build investor confidence and find evidence that they benefit from lower information asymmetry. The authors measure information asymmetry by insider trading, which is defined as the trading of a company’s shares by corporate insiders who have an information advantage with the aim to reap gains or avoid losses. Using a sample of U.S. firms listed in the MSCI World Index during the period 2004 to 2013 and the firm- and industry-level CSR rating from Global Engagement Service (GES), the authors show that insider transactions in firms with a high score on CSR activities lead to lower abnormal returns. This investigation extends current literature on the business case for CSR by explaining the influence of CSR activities on asymmetric information.

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Misdeeds Matter: Long-Term Stock Price Performance after the Filing of Class-Action Lawsuits

Cited by 18 publications

References 34 publications

Sustainable Development and Financial Markets

Sustainable Development and Financial Markets

An examination of management responsibility in shock events on shareholders’ wealth and reputation‐repair actions to rebound losses

Asymmetric Information and Corporate Social Responsibility

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