The Impact of CSR Advertising and Product Advertising on Abnormal Stock Returns: A Comparative Analysis Using Event Study Methodology

Corporate Social Responsibility (CSR) advertising has been shown to improve stock returns and promote positive image. This paper examines to impacts of institutional advertising and product advertising on stock prices. Is the adoption of CSR advertisements positively associated with the positive variations in stock prices? Does the impact of CSR advertisements differ from product advertising in explaining positive abnormal stock returns? We follow the definition of firms' CSR advertising as categorized by the Public Service Advertising in Korea. If advertising is grouped as institutional advertising or public service advertising then we categorized the adoption as CSR advertising. We test four hypotheses, focusing on comparing financial effectiveness between institutional advertising and product advertising. We find that CSR advertising is significantly positively associated with the abnormal returns in terms of moving window estimation, while product advertising is not significant in influencing the returns. We adopt the event study methodology to investigate the impact of institutional advertising and product advertising on abnormal stock returns. This study adopts an empirical approach for examining advertisements which were shown to the public through moving window estimation.This study highlights important implications for academicians and practitioners: we find that (1) institutional advertising supports companies contribute to public welfare as well as enhance the brand image and reputation of a company, (2) institutional advertising has a more substantial impact on stock price than product advertising, and (3) marketers in the financial service industry can inform stock investors about the positive effect on the abnormal stock return of advertising through advertising analysis for moving window estimation, Keywords Corporate Social Responsibility (CSR), Advertising, Event Study, Moving Window Estimation