Does Sound Corporate Social Responsibility Mitigate The Negative Intra-industry Contagion Effect?

Nowadays,negative events occur frequently among firms.Due to the increasingly close contact among firms,the adverse impact of a firm's negative events is likely to spread to other firms.This will cause serious economic losses to many innocent firms and will have a negative impact on the development of the whole market.Therefore,it is important and urgent for innocent firms to know how to deal with the contagion effect of negative events in advance.So,the thesis examines whether the negative contagion effect exists,that is,whether other firms in the same industry will have the same negative effects when a negative event occurs in a firm.What's more,the thesis makes an in-depth study on how different kinds of corporate social responsibility influence the negative industry contagion effects.This thesis uses irregularities in GTA database as the negative event sample.The results show that the financial scandal does have the contagion effect in an industry and that the contagion effect in an industry is not exactly the same when a negative event happens.The degree of contagion effect is affected by the different kinds of corporate social responsibility.The intra-industry contagion effect will be stronger when the corporate social performance of perpetrator is great.But,industry bystander firms who do better corporate social responsibility will have lower negative contagion effect.This is also right when the industry bystander's relative corporate social performance is great.From the perspective of investors,the thesis tells that sound corporate social responsibility will have insurance-like protection for industry bystander firms when faced a financial misconduct done by other firms in the same industry.Because investors will see these firms "differently" and then reduce the punishment on them.Theoretically,first,this study furthers our understanding on the contagion of misconduct,by linking it with CSR.Second,this study furthers our understanding on the insurance role of CSR.Practically,The findings have important practical implication for bystanders on when how to mitigate the risk of contagion in advance.