The effect of corporate social responsibility announcement on stock returns at the Nairobi securities exchange

Abstract

This study was undertaken with a view of establishing whether Corporate Social Responsibility announcements affect the stock prices of firms listed at the Nairobi Securities Exchange. The objective of study was to determine whether the Corporate Social Responsibility announcements generate abnormal returns of firms listed at the Nairobi Securities Exchange. These objectives were achieved by studying a sample of 8 firms listed at the NSE having made CSR announcement in the period of the study. The study adopted a descriptive research design, an event study methodology was performed where the Market Model was used to determine abnormal returns on a firm’s stock returns from the year 2011 to 2014, the daily adjusted prices for the sample stocks were recorded during the event window of 11 days, 5 days before and after the announcements. Data was extracted from the NSE Daily stock and NSE Handbook 2011-2014 and analyzed using Microsoft EXCEL. The study conclude that cumulative abnormal returns are associated with CSR announcement. CSR thus have a meaningful impact on the stock returns and any abnormal returns are just a result of chance.