Abstract

http://ssrn.com/abstract=1750368
 
 

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‘Good’ and ‘Evil’: The Relationship Between Corporate Social Responsibility and Corporate Political Activity


Brian Kelleher Richter


University of Texas at Austin - Red McCombs School of Business

January 28, 2011


Abstract:     
To determine if corporate social responsibility (CSR) and corporate political activity are economic substitutes or economic complements, I assemble and analyze the largest dataset possible from existing data sources incorporating both types of non-market behavior. Examining the joint distribution of an index of firms’ CSR behavior and an indicator of whether or not firms lobby reveals that firms at both the positive and the negative extremes of social responsibility are more likely to have been politically active. Regressing the CSR index and a measure of lobbying intensity, individually, on Tobin’s Q allows me to test whether CSR and corporate political activity separately enhance firms’ value; regressing an interaction between the CSR index and the measure of lobbying intensity on Tobin’s Q, allows me to test whether they play complementary roles in enhancing firms’ value. Higher CSR ratings, more intensive lobbying, and the interaction between the CSR rating and lobbying intensity all appear to increase value when comparing firms; however, when each firm is studied over time, only the interaction between CSR rating and lobbying intensity appear to increase firm value. Taken together this suggests that firms’ CSR positions work as an economic complement to its political activity rather than a substitute – jointly the two types of non-market behavior increase a firm’s value, while independently each activity is more difficult to reconcile and perhaps may simply be symptomatic of some other inherently unobservable firm-fixed characteristic such as ‘good management’. Illustrative cases round-out the large dataset analysis.

Number of Pages in PDF File: 36

Keywords: Non-Market Strategy, Corporate Social Responsibility, Corporate Political Activity, Lobbying, Financial Performance, Substitutes, Complements

JEL Classification: K2, L5, M14

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Date posted: January 28, 2011 ; Last revised: September 10, 2011

Suggested Citation

Richter, Brian Kelleher, ‘Good’ and ‘Evil’: The Relationship Between Corporate Social Responsibility and Corporate Political Activity (January 28, 2011). Available at SSRN: http://ssrn.com/abstract=1750368 or http://dx.doi.org/10.2139/ssrn.1750368

Contact Information

Brian Kelleher Richter (Contact Author)
University of Texas at Austin - Red McCombs School of Business ( email )
2100 Speedway
B6500, CBA 5.250
Austin, TX 78712
United States
512-232-6751 (Phone)
HOME PAGE: http://briankrichter.com/
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