Academic Conference on Good Business

The Effect of Corporate Social Responsibility Investment, Assurance, and Perceived Fairness on Investors’ Judgments

Both the supply and demand for corporate social responsibility (CSR) information are increasing (e.g., Simnett et al. 2009a; Holder-Webb et al. 2009; Cohen et al. 2011; Dhaliwal et al. 2011). An overarching question is whether CSR disclosures matter to individual investors. An issue of importance is what CSR factors affect investors‟ judgments. This paper investigates whether and how information about a company‟s CSR investment (either above or below the industry average) and whether the information has received third-party assurance services or not affects an investor‟s judgments about the company. Given the research that has documented how fairness affects business decision making (Cohen et al. 2007; Bierstaker et al. 2011), we also examine how the perceived fairness of the CSR activities affects investors‟ judgments. To examine these issues, we conducted a 2 x 2 between-subjects online sequential experiment in which investors provide an initial stock price assessment in the presence of financial information, then provide a revised assessment after viewing CSR information. Consistent with expectations, CSR investment and the perceived fairness of the CSR activities are associated with higher stock price assessment revisions, holding constant the positive nature of CSR performance. In addition, consistent with attribution theory (Hirst et al. 1995; Coram et al. 2009), the stock price revisions are higher in the presence of CSR assurance only when the CSR information is positive (i.e., above industry average). Implications for CSR research and practice are discussed.