Corporate Social Responsibility and the Stock Market : How were H&M stock prices affected by revelations of greenwashing practices and the following lawsuit?

Abstract: This thesis investigates the effect of new information regarding lack of corporate social responsibility on stock prices. This investigation is carried out through the analysis of how two different events relating to faulty corporate social responsibility (CSR) affected H&M stock prices. These events include one investigation published by the financial newspaper Quartz which revealed that H&M had been engaged in greenwashing practices, as well as a lawsuit that followed in which the grounds for suing was the information revealed in the investigation. To carry out the analysis the event study method is applied to deduce whether H&M stock experienced negative abnormal returns during a 9-day observation window following each event. The analysis concludes that the events had different effects on abnormal returns of H&M stock and that there is apathy toward CSR related practices and that any market reaction rather is due to financial ramifications. To deepen the analysis of the market’s reaction to these events, the efficiency of the market to do so will be considered through the lens of the efficient market hypothesis and the conservatism bias. The results showed that the market is inefficient in its response and investors seem to possess a conservatism bias.