Physical proximity, corporate social responsibility, and the impact of negative investor sentiment on stock returns: Evidence from COVID‐19 in China. (27th January 2021)

• Record Type: Journal Article
• Authors: Zhai, Huayun; Xiao, Mingsheng; Chan, Kam C.; Liu, Qingzhuo
• Is Part Of: International review of finance. Volume 22:Number 2(2022)
• Page Start: 308
• Page End: 314
• Publication Date: 2021-01-27
• Subjects: COVID‐19 -- investor sentiment -- physical proximity; Finance -- Periodicals; Financial institutions -- Periodicals; 332.673
• DOI: 10.1111/irfi.12343
• Languages: English
• ISSNs: 1369-412X

Abstract

Abstract: Using the Hubei province in China as the COVID‐19 pandemic epicenter and January 23, 2020 as the event date (the date the Chinese government announced the lockdown of Wuhan, the provincial capital), we document that while Chinese firms generally exhibited negative cumulative abnormal returns (CARs) around the event date, firms located far from the Hubei province experienced relatively less adverse impact by way of negative CARs than firms located close to and in the province. Moreover, firms that engaged strongly in corporate social responsibility (CSR) activities in terms of corporate donations prior to the event date experienced less of an adverse impact than those with no or weak CSR activities, suggesting that CSR serves an insurance‐like function that alleviates the adverse impact on stock returns precipitated by the negative investor sentiment stemming from COVID‐19.