Impact of CSR news reports on firm value

Purpose: This study clarifies the relationship between corporate social responsibility (CSR) news reports and firm value and identifies the mechanisms that constitute this relationship. Specifically, it identifies the roles of word of mouth (WOM) and traditional advertising in this relationship. Design/methodology/approach: The data set used for the analysis covers 77 firms in Korea from 2012 to 2015. The random-effects model is applied to verify three hypotheses. Using a three-step regression analysis and the Sobel test, this study reveals the roles of WOM and advertising expenditure in the relationship between CSR news reports and firm value. Findings: CSR news reports positively affect firm value, and this relationship is mediated by WOM and moderated by advertising expenditure. Notably, the positive effect of WOM on firm value is stronger for companies that spend less on advertising. Practical implications: The evidence implies that marketing managers could benefit from not only conducting CSR activities but also widely publicizing them. CSR news reports could help companies enhance public awareness of and interest in them. Originality/value: This is the first study to investigate the influence of CSR news reports using empirical data in Korea.