Schnietz and Epstein (2004)
Schnietz, Karen, and Marc J. Epstein. "Exporing the 'Crisis' Value of Reputation for Corporate Responsibility." Working Paper, 2004.
This event study examines investor reaction to the 1999 Seattle WTO failure on companies with and without strong reputations for social responsibility. The sample of 426 firms was composed of publicly-traded Fortune 500 companies for which stock price data was available (CRSP database). The sample was then segmented into a socially responsible group (defined as membership in the Domini Social Index) of 155 firms, and a group of 271 without a reputation for social responsibility. 10 firms were excluded due to confounding events during the event interval (from Friday 11/26 to the following Monday). The researchers note the concerns of McWilliams and Siegel (1997) on event studies - they keep the event window appropriately short, and include diagnostics suggested by McWilliams and Siegel to ensure that the methodology is used appropriately.
Finds that the portfolio of firms with a reputation for social responsibility declined by -1.1% (cumulative abnormal return, t=-1.5, p<0.10), while the portfolio of firms without a reputation for social responsibility fell by a much greater -2.36% (t=-3.33, p<.001). Results were similar after excluding firms with foreign sales or assets (N=151).
The authors estimate three different equations for cumulative abnormal returns, including important variables such as size, risk (beta), R&D intensity, and industry. In each model social responsibility remained a statistically significant factor, and the level of statistical significance grew as additional explanatory variables were added.
Concludes that "a reputation for corporate social responsibility yielded tangible financial benefit during the crisis of the Seattle meeting," and that this "adds to the growing evidence of a positive corporate social-financial performance relationship."
Link (published version): https://link.springer.com/article/10.1057/palgrave.crr.1540230