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Rhetoric, Reality, and Reputation: Do CSR and Political Lobbying Protect Shareholder Wealth against Environmental Lawsuits?

Published online by Cambridge University Press:  18 January 2019

Abstract

We investigate whether firms’ corporate social responsibility (CSR) reputations and environmental lobbying efforts protect shareholder wealth in the event of environmental lawsuits. Using a sample of lawsuits filed in United States Federal Courts, we find that firms with superior CSR reputations suffer worse market reactions to environmental allegations. In contrast, lobbying cushions filing-date valuation losses, providing insurance-like protection against lawsuits. Our results are robust to subsample analyses, a falsification test, propensity score matching, and alternative empirical proxies and model specifications.

Type
Research Article
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2019 

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Footnotes

1

We are grateful to Efraim Benmelech, Philip Bond, Paul Brockman, Jean Canil, Ran Duchin, Alex Edmans, Andrea Eisfeldt, Huasheng Gao, Umit Gurun, Jarrad Harford, Alan Hess, Christopher Hrdlicka, Avraham Kamara, Jonathan Karpoff, Sanne Knudsen, Jennifer Koski, Juan Luo, Paul Malatesta (the editor), Sarah McVay, George Mihaylov, Thuc Anh Nguyen, Edward Rice, Stephan Siegel, Avanidhar Subrahmanyam, Victoria Vanasco, Eric Wehrly (the referee), and participants at a seminar presentation at the University of Washington for their helpful comments and discussions.

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