Strange Bedfellows? - Voluntary CSR Disclosure and Politics
Paul A. Griffin
University of California, Davis - Graduate School of Management
Boston University - Questrom School of Business
February 12, 2013
Forthcoming in Accounting & Finance
Based on a comprehensive sample of companies’ voluntary disclosures about corporate social responsibility from the CSRwire news service, we show a reliable association between the CSR disclosure intensity of a company and its political interests, which we proxy by the contributions of company individuals to political action committees registered with the Federal Election Commission and statewide voting in presidential elections. This relation is most pronounced for the contributions of Democratic individuals who work at companies in states where the voting favors the Democratic presidential candidate. We then examine if those contributions add shareholder value by testing whether they explain investors’ response to CSR news disclosure. Our tests show a positive and significant association between corporate political contributions and excess stock returns. These results are the first of which we are aware to establish, in the context of corporate social responsibility, that political contributions by company individuals associate with economic gains to shareholders. A portfolio strategy of investing based on company size, CSR disclosure intensity, and company individuals’ political contributions produces a significant positive mean excess stock return of 4.5 percent over three months following CSR disclosure. These results challenge the widely held belief that money does not seem to curry favor with politicians or regulators to improve the standing of shareholders.
Number of Pages in PDF File: 46
Keywords: corporate social responsibility, voluntary disclosure, stock market response, corporate political contributions, political action committees, presidential voting
JEL Classification: G14, M41, M45, K22, Q20
Date posted: October 31, 2012 ; Last revised: February 14, 2013
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