Drawing upon behavioral sentiment theory and insurance theory, this paper examines the impact of increased investor awareness of corporate social irresponsibility (CSiR) on stock returns by showing that media coverage provides an important channel through which social media influences investor sentiment and awareness regarding CSiR. Using a unique research setting in Korea based on textual analysis, we find that investors exhibit short-term negative reactions to CSiR events. In addition, the increased social awareness and/or investor sentiment of CSiR issues through media coverage leads investors to penalize firms more severely. We also find that the negative reaction to CSiR events is larger for firms with greater negative media tone and greater surprise. The combined evidence is supportive of the behavioral sentiment theory. Furthermore, the negative effects of CSiR on stock returns are smaller for firms with a positive CSR reputation, consistent with insurance theory. 

Keyword: Corporate Social Irresponsibility (CSiR), Media coverage, Investor awareness, Stakeholder theory
JEL Classification: M14, G14, G41, L82