Essays on corporate social (ir)responsiblity, alliance formation and stock market reaction

This dissertation consists of two essays related to corporate social (ir) responsibility (CSR/ CSI), alliance formation, and stock market reaction. The first essay examines how a potential partner’s performances in CSR and CSI may play distinct signaling roles in influencing alliance formation. I argue that partner CSR primarily serves as a signal of the partner’s trustworthiness, increasing a focal firm’s willingness to collaborate with a high-CSR partner. In contrast, partner CSI primarily signals the risks of negative spillover of a partner’s reputation for social irresponsibility to a focal firm, reducing the focal firm’s propensity to ally with a high-CSI partner. I further identify two boundary conditions, namely, proximity and media coverage, that help verify the distinct signaling roles of partner CSR and CSI. Overall, the findings suggest that the dominant signaling mechanisms underlying partner CSR and CSI are different. The second essay examines the influence of firm foreignness on the investors’ negative reactions to firms’ CSI. Building on social identity theory and attribution theory, I propose that firm foreignness forms a critical part of firm identity that helps investors distinguish firms between localness and foreignness. The higher identification with local firms, in turn, forms investors’ self-attributions in the context of CSI coverage, motivating them to react more negatively to foreign firms’ CSI than that of local firms. In addition, I argue that the relationship between firm foreignness and negative investors’ reaction to CSI is weakened when the firm has been listed for a longer time or has more local ownership. I find support for these arguments using a sample of 2,283 CSI coverage by firms listed in the U.S. stock market from 2007 to 2018.