What does corporate social advocacy signal? Evidence from boycott participation decisions

PURPOSE – This paper explores how a firm’s public stand on a social-political issue can be a salient signal of the firm’s values, identity and reputation. In particular, it investigates how boycott participation–conceptualized as a cue of a corporation’s stand on important social-political issues–may affect the stock market valuation of that corporation, as well as how corporations legitimise their stand on the issues. DESIGN/METHODOLOGY/APPROACH – The authors employ a mixed-methods design that uses both qualitative techniques (content analysis) and quantitative methods (event study methodology) to examine a sample of US firms who participated in a boycott campaign that sought to call attention to issues of hate speech, misinformation and discriminatory content on social media platform Facebook. FINDINGS – Findings from the qualitative content analysis of company statements show that firms legitimise their stand on, and participation in, the boycott by expressing altruistic values and suggesting to stakeholders that their stand aligns not only with organizational values/convictions but also with the greater social good. Importantly, the event study results show that firms who publicly announced their intention to participate in the boycott, on average, earn a statistically significant positive abnormal stock return of 2.68% in the four days immediately after their announcements. Research limitations/implications – Findings relate to a specific case of a boycott campaign. Also, the sample size is limited and restricted to US stocks. The signalling value of corporate social advocacy actions may vary across countries due to institutional and cultural differences. Market reaction may also be different for issues that are more charged than the ones examined in this study. Therefore, future research might investigate other markets, use larger sample sizes and consider a broader range of social-political issues. PRACTICAL IMPLICATIONS – The presence of significant stock price changes for firms that publicly announced their decision to side with activists on the issue of hate propaganda and misinformation offers potentially valuable insights on the timing of trades for investors and arbitrageurs. Insights from the study also provide a practical resource that can be used to inform organizations’ decision-making about such issues. SOCIAL IMPLICATIONS – Taking the lead to push on social-political issues, such as hate propaganda, discrimination, among others, and communicating their stands in a way that speaks to their values and identity, could be rewarding for companies. ORIGINALITY/VALUE – This study provides novel evidence on the impact that corporate stances on important social-political issues can have on stock market valuation of firms and therefore extends the existing related research which until now has focused on the impact on consumer purchasing intent and brand loyalty.https://www.emerald.com/insight/2514-4774.htmam2022Economic

How do markets react to political elections during periods of insecurity and governance crises? Evidence from an African emerging democracy

PURPOSE – This paper operationalizes insecurity and governance crises to study their effects on stock market response to two political events in Nigeria – the 2015 and 2019 presidential elections. DESIGN/METHODOLOGY/APPROACH – An event study was used to capture the market responses. Abnormal returns at the aggregate and sectoral levels were measured over several time windows before and after the respective election results were announced. FINDINGS – The market reacted strongly positively to a change in presidency from an incumbent to an opposition party candidate in the 2015 election but weakly positively, at best, to the re-election of the incumbent candidate in the 2019 election. In addition, banking stocks exhibited greater sensitivity to these events than oil and gas stocks. RESEARCH LIMITATIONS/IMPLICATIONS – There may be peculiarities with the Nigerian case and with the two elections analyzed. Therefore, future research could focus on understanding the extent to which the results generalize to the broader sub-Saharan context and other regions that face similar governance challenges. PRACTICAL IMPLICATIONS – Understanding that markets may have a different perception towards incumbent versus opposition candidate electoral victories during periods of insecurity and governance crisis is important for investors, policymakers, researchers and the wider society. ORIGINALITY/VALUE – Past empirical studies on political events and stock returns in Sub-SaharanAfrica contexts such as Nigeria ignore shifts in voter mood and produce contradictory findings. This paper helps to resolve some of these contradictions by providing insight into how the markets can have a different perception towards incumbent and opposition candidate electoral victories during periods of insecurity and governance crisis.https://www.emerald.com/insight/2040-0705.htmam2023Economic

Does investors’ valuation of corporate environmental activities vary between developed and emerging market firms?

We compare the market reactions of developed and emerging market firms to reconstitutions of the FTSE Environmental Opportunities (FTSE EO) index. Our primary finding is that developed market firms that were added to or deleted from the FTSE EO experience significant increases in stock prices and trading volumes even after controlling for institutional ownership and size effects. In contrast, emerging market firms experience declines in both stock prices and trading volumes.http://www.elsevier.com/locate/frl2024-06-06hj2022Economic

Do investors value environmental sustainability? Evidence from the FTSE Environmental Opportunities 100 index

To examine whether investors value environmental sustainability, we analyze stock market reactions of the firms added to or deleted from the FTSE Environmental Opportunities 100 index (FTSE EO 100). Firms added to the FTSE EO 100 that were not previously in the FTSE EO and firms removed from the FTSE EO index series altogether do not show significant stock price changes. In contrast, firms added to the FTSE EO 100 from the FTSE EO exhibit a sustained stock price gain, whereas deletions from the FTSE EO 100 that still stay in the FTSE EO show a sustained stock price decline.http://www.elsevier.com/locate/frl2023-05-08hj2022Economic