Jongwan Bae investigates the reputational role of corporate social responsibility in context of financial misconduct

The assistant professor of finance’s research was published in European Financial Management.

Jongwan Bae, assistant professor of finance in the Martha and Spencer Love School of Business, recently co-authored an article that examined the reputational role of corporate social responsibility (CSR) by focusing on investors as the target stakeholders and financial misconduct as the crisis.

Jongwan Bae, assistant professor of finance

In the European Financial Management article, “Corporate social responsibility: An umbrella or a puddle on a rainy day? Evidence surrounding corporate financial misconduct,” Bae and co-authors Wonik Choi and Jongha Lim from California State University-Fullerton look into the way a fraudulent firm’s pre- and post-misconduct CSR engagement is associated with its stock performance.

Their results found that “firms with good CSR performance suffer smaller market penalties upon the revelation of financial wrongdoing, supporting the buffer effect, as opposed to the backfire effect, of a good social image.”

“We also find,” write the authors, “that the misbehaving firms’ post‐misconduct CSR efforts are negatively associated with delisting probabilities, and positively with stock returns. These findings support the argument that increasing post‐crisis CSR engagement can be an effective remedy for a damaged reputation.”

European Financial Management (EFM) provides a forum for both academics and practitioners concerned with the financial management of modern corporations and financial institutions. The journal publishes significant new finance research on timely issues and highlights key trends in Europe in a clear and accessible way, with articles covering international research and practice that have direct or indirect bearing on Europe.