How Does the Stock Market Value Corporate Social Performance? When Behavioral Theories Interact with Stakeholder Theory

This study examines how the reference-point effect and sunk-cost fallacy interact with stakeholder theory and influence how investors evaluate corporate social performance. We propose that ex-ante (pre-IPO) corporate social performance influences ex-post (post-IPO) perceived riskiness and that this relationship is U-shaped. We also evaluate how CEO duality and company age moderate this U-shaped relationship. Using young and newly public entrepreneurial firms in China, and focusing on stock returns in the secondary market, empirical results and robustness tests provide strong support for our hypotheses.