Research On Investors’ Reaction To Corporate Social Responsibility Behavior

Corporate Social Responsibility(CSR) has become increasingly important in management, but there still are many key issues under researched. Based on the instrumental stakeholder theory, CSR should lead to stakeholder ’s positive reaction to firms and does good to Corporate Financial Performance(CFP). Though the relationship between CSR and CFP is very important, the empirical researches on this area have no consensus and the instrumental stakeholder theory doesn’t be supported by empirical researches. A firm has many different types of stakeholders, and different stakeholders react to CSR behavior differently, so it’s necessary to investigate the every single type stakeholders ’ reaction to CSR behavior. Most of empirical researches on stakeholders’ reaction to CSR behavior focused on customers’ reaction or employees’ reaction. Researches on investors’ reaction to CSR behavior are very rare. This paper focuses on investors’ reaction to CSR behavior to discover the influence path through which CSR impacts CFP, and makes a contribution to the instrumental stakeholder theory.This paper discovers the mechanism of stakeholders ’ reaction to CSR behavior through analyzing investors ’s reaction to CSR behavior. This paper investigates the internal factors and external factors respectively to dis cover the mechanism of investors’ reaction to CSR behavior and proposes the research construct model which conducts the following research. This paper argues that CSR behavior plays a market signal role and help the investors who face a information asymmetry to pick out a good stock and make a investments decision. Firstly, based on theoretical analysis this paper proposes research hypotheses. This paper collects data from Southern Weekend CSR research center, Chinese Academy of Social Sciences CSR research center and RESSET database and uses event study method to test the research hypotheses. According to the empirical results, investors treat CSR behavior information as a good sign of firm ’s performance, and react positively to it. Secondly, according to t he research construct model, investors’ CSR cognition and preference is the internal factors of investors’ reaction to CSR behavior. For the reason of different type of investors would have different CSR cognition and preference, so this paper analyze the institutional investors CSR cognition and preference and individual investors CSR cognition and preference respectively. Based on the theoretical analysis, this paper proposes research hypotheses and tests them through empirical research. Thirdly, according to the research construct model, the external factors of investors’ reaction to CSR behavior include firm characters and event characters. Based on the theoretical analysis, this paper analyzes the firm characters and event characters. At last, this paper proposes research hypotheses and tested them.This paper proposes a new opinion that CSR behavior plays a signal role in the market. Besides that, this paper defines a new conception of information intensity and argues that information intensity moderat es investors’ reaction. When the information intensity is high, investors will react positively to CSR behavior, while when the information intensity is low, investors will not react significantly. Based on the theoretical analysis of institutional investo rs’ CSR cognition and preference and individual investors ’ CSR cognition and preference, this paper draws a conclusion that institutional investors ’ CSR preference is more intense than individual investors and will react more strongly. This means institutional investors take the more important part in the investors ’ reaction to CSR behavior. When investigating the firm characters which will influence investors’ reaction to CSR behavior, this paper takes the industry and firm growth ability as research variables and finds out investors’ positive reaction will be more strongly in key environmental monitoring industry and investors will react more strongly to firms with high growth ability. When investigating the event characters which will influence investors ’ reaction to CSR behavior, this paper focuses employee domain CSR behavior and through textual analysis method to collect data. Based on the empirical research, this paper argues that investors will react positively to positive CSR event and react negatively to negative CSR event, and investors’ reaction will become more and more strongly over time. Besides that, this paper also argues that investors will react more positively and strongly to positive CSR events which have a low relevancy with current profit and investors will react more negatively and strongly to negative CSR events which have no compliance. Above all, this paper has discovered the general mechanism of investors’ reaction to CSR behavior.This paper concludes that Chinese investors ’ reaction is significant positive to CSR behavior and supports the instrumental stakeholder theory. This paper argues that CSR behavior improves the image of firms and does good to social capital. After receiving the information of CSR behavilr, investors will re act positively to CSR behavior and affect CFP positively. This conclusion reveals the mechanism of the effect of CSR behavior on CFP through investors ’ reaction. The discussion of the medorate role of information intention, firm characters and event characters makes contribution to the instrumental stakeholder theory. The conclusions of this paper may help the managers to make an efficient CSR strategy and communicate with investors more efficiently. This paper manifests that Chinese investors support firms to initiate CSR behavior and Chinese investors have the will to invest Socially Responsible Investment(SRI) funds. Chinese security market should provide more SRI funds for investors and promote SRI development.