STOCK MARKET REACTION TO CSR NEWS: EVIDENCE FROM THE DHAKA STOCK EXCHANGE

Abstract

This paper aims to investigate the stock market reaction in response to news related to corporate social responsibility on the stock prices of listed companies in the Dhaka Stock Exchange of Bangladesh. It analyses 101 news items released from 2017 to 2023, in four CSR dimensions (healthcare, education, environment, and disaster management) using the event study. A [-2, +2] event window is specified to assess the market’s perception. The results reveal heterogeneous market responses to different CSR news. Corporate social responsibility News in education and disaster management is well-received by investors and generates positive abnormal returns. This is perceived as value-creating because it aligns with national sustainable goals, builds goodwill, and ensures ongoing social acceptance. Environment-related CSR news generates a strong and significant negative abnormal return. Investors appear to view it as a costly signal of regulatory burdens and eroding short-term shareholder value. Equity market remains indifferent to healthcare-related CSR, with an insignificant negative abnormal return, viewing it as neither a strategic advantage nor a major financial detriment. The theoretical implications of these findings strongly support Signaling theory and Stakeholder theory. This research offers crucial insights for various stakeholders from practical point of view by providing a strategic roadmap for management, establishing CSR news as price-sensitive information for investors and analysts, and advising regulators like the BSEC to develop formal disclosure guidelines to enhance market efficiency and fairness.