Abstract

http://ssrn.com/abstract=2212814
 
 

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Footnotes (19)



 


 



Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence


Rui A. Albuquerque


Boston University - School of Management; Católica-Lisbon School of Business and Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Art Durnev


University of Iowa - Henry B. Tippie College of Business

Yrjo Koskinen


The Wharton School - University of Pennsylvania

May 1, 2013

UCD & CalPERS Sustainability & Finance Symposium 2013

Abstract:     
This paper presents an industry equilibrium model where firms can choose to engage in corporate social responsibility (CSR). We model CSR activities as an investment in customer loyalty and derive predictions for how CSR affects systematic risk and firm value. The paper tests the predictions empirically and finds evidence consistent with the following: CSR firms exhibit lower systematic risk and this effect is stronger in differentiated goods industries, in consumer goods industries and in industries where the market capitalization of CSR firms is lowest; CSR firms have higher firm value; and, the ratio of CSR profits to non-CSR profits is countercyclical. In the empirical tests, we address a potential endogeneity problem by instrumenting CSR using data on the political affiliation of the firm’s home state, and data on environmental and engineering disasters and product recalls.

Number of Pages in PDF File: 59

Keywords: corporate social responsibility, customer loyalty, systematic risk, expected return, industry equibrium

JEL Classification: G12, G32, D43, L13, M14

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Date posted: February 7, 2013 ; Last revised: July 9, 2013

Suggested Citation

Albuquerque, Rui A. and Durnev, Art and Koskinen, Yrjo, Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence (May 1, 2013). UCD & CalPERS Sustainability & Finance Symposium 2013. Available at SSRN: http://ssrn.com/abstract=2212814 or http://dx.doi.org/10.2139/ssrn.2212814

Contact Information

Rui A. Albuquerque
Boston University - School of Management ( email )
595 Commonwealth Avenue
Boston, MA MA 02215
United States
HOME PAGE: http://people.bu.edu/ralbuque/
Católica-Lisbon School of Business and Economics ( email )
Caminho da Palma de Cima
Lisbon, 1649-023
Portugal
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Artyom Durnev (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
(514) 398-5394 (Phone)
(514) 398-3876 (Fax)
HOME PAGE: http://www.artdurnev.com
Yrjo Koskinen
The Wharton School - University of Pennsylvania ( email )
Finance Department
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-1587 (Phone)

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