By: Susan Kayser, Erb Institute Post-doctoral Fellow, University of Michigan

Abstract: Catastrophes increase pressure upon all firms within the industry. However, certain firms risk larger punishments after the event. I posit that firms with substantive corporate social responsibility (CSR) initiatives will lose more firm-value after a catastrophe because they will be expected to engage in costly self-regulation to lessen pressure on the industry. I also argue that due to strategic activist targeting, firms subject to greater past activism will lose more firm-value. I develop my hypotheses by combining theories on the reputation commons problem, the value of CSR, and social movements. Using an event-study, I examine the apparel industry after the collapse of Rana Plaza. Results indicate that firms with substantive CSR initiatives and firms subject to greater activism lost more firm-value after the collapse. Read the working paper here (pdf) or online here.