Abstract:
Purpose – This paper aims to examine the relationship between corporate social responsibility (CSR)
and shareholder wealth arising from announcement returns of security issuance from a frontier market. It
also explores the role of business group affiliation (BGA) on this relationship.
Design/methodology/approach – The study uses short-term scenarios to examine the link between
CSR and shareholder wealth using the event study methodology which helps us mitigate the reverse
causality problems related to studies of the relationship between CSR and firm value. Abnormal returns
surrounding the security issue announcements were generated using themarketmodel.
Findings – This paper finds that security issuers with high CSR scores are associated with higher
shareholder value. However, this paper finds that CSR activities of security issuers with BGA are valuedestroying
which is consistent with the agency perspective of CSR.
Research limitations/implications – This study is limited to only one nascent market, namely the
Colombo Stock Exchange.
Originality/value – This study documents that CSR and BGA are important determinants, among others,
of stock price reactions to security offerings in emerging markets.
