Is Reputation for Corporate Social Responsibility a Double-Edged Sword? Lessons from Investor Reactions on Foreign Companies Activity in Russia During the Invasion of Ukraine

Reputation for corporate social responsibility (CSR) is an asset that protects a company's value during a crisis. But can this reputation become a liability at the same time? To answer this question, we studied how CSR reputation affected investors' reactions towards foreign publicly traded corporations present in Russia in the aftermath of Russia's invasion of Ukraine. Our study covers 674 publicly traded corporations from 36 countries on 6 continents, representing 11 industries. Applying the event study methodology, we tested investors' reactions to two types of news: (1) news of the invasion, and (2) news of changes in the scale of activities in Russia specific to each company. In the first case, we find that CSR reputation softens the negative impact on firm value. In the second case, we need to classify company decisions as either symbolic or substantive, since investors react positively to the former and negatively to the latter. We find that when companies committed to CSR limited their response to symbolic actions, rather than declaring a withdrawal from Russia, investors' reactions were negative compared to companies with no reputation for CSR. In sum, we provide novel evidence on the conditional effects of CSR and the need to walk the talk.