Relationship between Corporate Social Responsibility and Crash Risk of Stock Price

Document Type : Research Paper

Authors

1 Assistant Professor of Accounting, Alzahra University

2 M.A of Accounting, Alzahra University

Abstract

Corporate Social Responsibility (CSR) for accountability in business could be regarded as the fundamental issue for organizational behavior in a society, and as the determinant of the environment for business expansion and the net worth of resources, as well as business responsibility against stakeholders. This study aims to examine the relationship between CSR and the crash risk of stock price in future in the companies listed in the Tehran Stock Exchange (TSE). To measure the CSR, 24 items of the report of board of directors, and to measure the future stock price crash, the negative conditional skewness of firms’ monthly returns, and then, down-to-up volatility of the stock prices in a financial year, were determined.
The tests of hypotheses were carried out in pooled and panel data models, using data from sample firms in the TSE in the period 2009 to 2013. The findings for the first hypothesis showed that there is not significant relationship between CSR and future stock price crash, regarding the conditional skewness measure. However, the findings for the second hypothesis indicated that there is significant negative relationship between CSR and future stock price crash, regarding down-to-up volatility measure of the stock price.

Keywords

References

Abbasi, E., Shohrati, A., Ghadakforooshan, M. (2013). The effect of accounting conservatism on the risk of falling stock prices in terms of information asymmetry in Tehran Stock Exchange. Journal of Accounting Knowledge. 5(19), 141-162 ]In Persian].
Abdollahi, R., Hejazi, R. (2014). Relationship between disclosure of corporate social responsibility in companies listed on the Tehran Stock Exchange and aggressive tax activities. M.Sc thesis of Alzahra University] In Persian].
Bradley, J., Robert, L. (2009). Corporate social responsibility and energy. In: Horowitz, I.L. (Ed.), Culture and Civilization. Transaction Publishers, New Jersey, 181-197.
Carroll, A.B. (1979). A three-dimensional conceptual model of corporate performance. The Academy of Management Review, 4(4), 497-505.
Cullen, J.L., Fang, X. (2011). Institutional investors and crash risk: Monitoring or expropriation, Working Paper, University of Toronto and Georgia State University.
Andreou, C., Antoniou, P., Horton, C.J., Louca, C. (2012). Corporate governance and stock price crashes. Available at URL: http://www. ssrn. com.
Chen, J., Hong, H., Stein, J. (2001). Forcasting crashes: Trading volume, past return and conditional skewness in stock price. Journal of Financial Economic, 61(3), 345-381.
Fattaahi, R., Moshki, M. (2011). The impact of accounting conservatism on stock price crash risk in the Tehran Stock Exchange. Behshahr Payame Noor Universty [In Persian].
Foroughi, D., Amiri, H., Mirzaee, M. (2012). The impact of opacity in financial reporting on the future stock price crash risk of listed companies in Tehran Stock Exchange. Financial Accounting Researches, 10(4), 15-40 ]In Persian].
Gelb, D., Strawser, J.A., (2001). Corporate social responsibility and financial disclosures: an alternative explanation for increased disclosure. Journal of Business Ethics, 33(1), 1-13.
Gojarati. D. (2013). Basic econometric. Translate by Abrishami, H. Tehran University Publication, 5th edition ]In Persian].
Hemingway, C., Maclagan, P. (2004). Managers’ personal values as drivers of corporate social responsibility. Journal of Business Ethics, 50(1), 33-44.
Hong, H., Stein, J. (2003). Differences of opinion, short-sales constraints and market crashes. Journal of the Review of Financial Studies, 14(2), 487-525.
Hutton, A.P., Marcus, A.J., Tehranian, H. (2009). Opaque financial reports R2 and crash risk. Journal of Financial Economic, 94(1), 67-86.
Jamali, D. (2007). The case for strategic corporate social responsibility in developing countries. Journal of Business and Society Review, 1(112), 1-27 ]In Persian].
Jin, L., Myers, S.C. (2006). R2 around the world: New theory and new tests. Journal of Financial Economics, 79(2), 257-292.
Khan, M., Watts, R.L. (2009). Estimation and empirical properties of a firm-year measure of accounting conservatism. Journal of Accounting and Economics, 48(2-3), 132-150.
Kim, Y., Li, H., Li, S. (2014). Corporate social responsibility and stock price crash risk. Journal of Banking & Finance, 43(2014), 1-13.
Kim, J.B., Zhang, L. (2010). Does accounting conservatism reduse stock price crash risk? Available at URL: http://www.ssrn.com.
Kim, J.B., Li, Y., Zhang, L. (2011a). Corporate tax avoidance and stock price crash risk: firm-level analysis. Journal of Financial Economics, 100(3), 639-662.
Kim, J.B., Zhang, L. (2013). Accounting conservatism and stock price crash risk: Firm level evidence contemporary. Journal of Accounting Research, 33(1), 412-441.
Kim, Y., Park, M.S., Weir, B. (2012). Is earnings quality associated with corporate social responsibility? Journal of the Accounting Review, 8(3), 761-796.
Kothari, S.P., Shu, S., Winsock, P.D. (2009). Do managers with hold bad news? Journal of Accounting Research, 47(1), 241-276.
Lankaran, N., Hosseini, A. (2015). The impact of corporate social responsibility (csr) on financial reporting quality. M.Sc thesis of Alzahra University ]In Persian].
Omidvar, A.R. (2005). The government's policy to promote corporate social responsibility in Iran. Master's thesis, faculty of law and political science, policy studies general, Tehran University ]In Persian].
Petrovits, C. (2006). Corporate-sponsored foundations and earnings management. Journal of Accounting and Economics. 41(3), 335-361.
Prior, D., Surroca, J.A., Tribo, J. (2008). Are socially responsible managers really ethical? Exploring the relationship between earnings management and corporate social responsibility. Corporate Governance: An International Review. 16(3), 160-177.
Rahmani, A., Aliabadi, S. (2014). Conservatism pricing. Journal of Accounting Knowledge, 4(15), 33-51 ]In Persian].
Mahmoodi, S., Diyanati, Z. (2011). The impact of institutional investor on risk reduction of stock value crash. MSc. thesis of University of Economic Sciences ]In Persian].
Mirzaei, M., Foroughi, D. (2012). The impact accounting conditional conservatismon the future stock price crash risk of listed companies in Tehran Stock Exchange. Journal of Accounting Progress of Shiraz University, 4(2), 77-117 ]In Persian].
Moradi, J., Valipour, H., Ghalami, M. (2012). The impact of accounting conservatism on reducing of stock price crash risk. Journal of Management Accounting, 4(4), 93-106 ]In Persian].
Zu, L., Song, L. (2008). Determinants of managerial values on corporate social responsibility: Evidence from China. IZA Discussion Paper, 88(1), 105.

Files

History

  • Receive Date: 29 August 2016
  • Revise Date: 04 February 2017
  • Accept Date: 21 March 2017

Share

How to cite

Statistics