Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence
Rui A. Albuquerque
Boston University - Questrom School of Business; Católica-Lisbon School of Business and Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
University of Iowa - Henry B. Tippie College of Business
The Wharton School - University of Pennsylvania
October 23, 2015
This paper presents an industry equilibrium model where firms have a choice to engage in corporate social responsibility (CSR) activities. We model CSR activities as a product differentiation strategy allowing firms to benefit from higher profit margins. The model predicts that CSR decreases systematic risk and increases firm value and that these effects are stronger for firms operating in differentiated goods industries and when consumers' expenditure share on CSR goods is small. We find supporting evidence for our predictions. We address a potential endogeneity problem by instrumenting CSR using data on the political affiliation of the firm's home state.
Number of Pages in PDF File: 62
Keywords: corporate social responsibility, product differentiation, systematic risk, beta, firm value, industry equilibrium
JEL Classification: G12, G32, D43, L13, M14
Date posted: November 20, 2011 ; Last revised: November 7, 2015
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.407 seconds