Corporate Social Irresponsibility and Portfolio Performance: A Cross-National Study

Abstract This study examines the impact of reputational risk, measured by corporate social irresponsibility (CSI) ratings, on shareholder abnormal returns. Based on 7,368 non-financial companies from 42 countries during 2007-2017, we find that long-short portfolios (buying no reputation risk and selling high reputation risk portfolios) earn significantly positive abnormal returns. The cross-national results indicate that the long-short portfolio returns are more pronounced (i) in the emerging market segment than in the developed market segment, (ii) in civil law jurisdictions than in their common law peers, (iii) within nations with higher confidence in corporations and, (iv) within nations with higher institutional trust.