Sarumpaet, Susi and Ernie, Hendrawaty (2018) Market reaction to corporate unethical behaviours: A Study from Indonesia. In: 7 th Italian Conference on Social and Environmental Accounting Research, 20-21 September 2018, Urbino, Italy.
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Abstract
bstract This research examines market reactions to socially irresponsible corporate behaviours. An event study was conducted to detect the presence of abnormal returns during the releases of media news regarding the social irresponsible practices of Indonesian listed companies in environmental, social and financial aspects. The examples of unfavorable environmental practices are illegal lodging, forest fires, and pollutions, while in social aspects it includes labor strikes and lay-offs, market monopoly, and similar practices. Socially irresponsible practices in financial aspect includes frauds and tax evasions. Prior studies from more developed nations have been widely documented in the literature. However, the use of media reports of three different aspects to measure the event is new to the study. The results of prior studies, which mostly come from developed markets, have also been inconclusive. The use of a sample from a developing market is expected to provide distinct contribution to the existing literature. The results show that Indonesian stock market responded to media news regarding corporate unethical behaviors, particularly in social aspect, as indicated by negative abnormal returns in the third day after the news releases by prominent online newspapers, Kompas. When such information is split into each category, namely: environmental, social, financial information, the result is only consistent for social issues. Negative abnormal returns occurred on the third day after the media reports of unethical social behaviors of the sample firms. However, we did not find significant market responses to media reports of unfavorable financial and environmental practices by the sample companies. Using paired sample t-tests to examine the market response before and after the event, this study only finds significant difference in cumulative abnormal returns for unfavorable social practices. In general this study offers an empirical evidence that media reports on CSR issues have information content, especially for firms reported as having problems in maintaining social responsibility. Keywords: abnormal returns, corporate social irresponsibility, developing market, Indonesia, market reaction, share price
| Item Type: | Conference or Workshop Item (Paper) |
|---|---|
| Subjects: | H Social Sciences > HF Commerce > HF5601 Accounting |
| Divisions: | Fakultas Ekonomi dan Bisnis (FEB) > Prodi Akuntansi |
| Depositing User: | Susi Sarumpaet |
| Date Deposited: | 17 Aug 2021 00:16 |
| Last Modified: | 17 Aug 2021 00:16 |
| URI: | http://repository.lppm.unila.ac.id/id/eprint/14432 |
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