Multinational firms frequently outsource the manufacturing of their products to factories in less- developed countries to take advantage of much lower labor costs. A tragic disaster occurred in Bangladesh in April 2013 when a clothing factory building collapsed, killing more than a thousand workers. Subsequently, textile companies in the U.S. and in Europe who outsource their manufacturing in Bangladesh had to decide whether to commit to better working conditions by signing one of two worker safety agreements (WSAs) born in the after-math of the tragedy. Although many firms signed one of these agreements, many more did not. This study explores the relationship between an actual corporate social responsibility (CSR) commitment and firm performance, using a sample of companies who signed one of the WSAs after the Bangladesh disaster and those who did not. The results suggest that the decision to sign is positively associated with social visibility, prior CSR performance, and impact in stock price after the tragedy. Regarding subsequent performance, investors favorably responded to the news of firms’ signing on to the WSA agreement.

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Copyright © 2017. American Accounting Association. Article first published online: 01 JAN 2017.

DOI: 10.2308/jiar-51658.

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