Stakeholders and the Stock Price Crash Risk: What Matters in Corporate Social Performance?

This paper provides evidence on the differential impacts of corporate social responsibility (CSR) initiatives, targeted at different stakeholder groups, on stock price crash risk. Our results reveal that the managerial bad news hoarding and its resultant stock crashes are largely determined by the social CSR dimension. The easy availability of broad-based governance information, and contrastingly obscure nature of environmental initiatives make the corresponding governance and environmental dimensions trivial to stock crashes. Moreover, only those social CSR subcategories that are aimed at specific stakeholder groups (such as the community, employees or customers) tend to mitigate future crashes. Applying dynamic panel regressions and a quasi-natural experiment, our analyses confirm that these effects on crash risk are likely to be causal.