Issues in the Use of the Event Study Methodology: A Critical Analysis of Corporate Social Responsibility Studies

Organizational researchers are increasingly using the event study methodology to assess the effect of strategic decisions on firm performance. Unfortunately, event studies alone are inadequate because, at best, they provide estimates of the short-run impact on shareholders only and not on other corporate stakeholders. Furthermore, event study findings are sensitive to even small changes in research design. The authors illustrate the lack of robustness by examining five recent studies of corporate social responsibility (CSR) that report conflicting results. They conclude that these contradictory findings arise from significant differences in research design and implementation. The authors also demonstrate why it is inappropriate to draw conclusions regarding the managerial implications of CSR activities from these studies. Finally, they identify alternative methodologies that organizational researchers could use to supplement the event study approach to assess the overall impact of CSR on stakeholders.