Can Social Capital and Reputation Mitigate Political and Industry-Wide Risk?

62 Pages Posted: 28 Jan 2019 Last revised: 22 Oct 2020

Date Written: October 20, 2020

Abstract

We assess whether social capital, captured by CSR, is an effective hedge against risks arising from political and industry-wide uncertainty. Social capital significantly reduces stock return volatility during political uncertainty, but not cash flow volatility. Meanwhile, CSR is also an effective hedge against stock return volatility that arises from peer competition. Finally, the hedging effect of social capital on stock return volatility is transient but has a positive effect on firms’ future performance and growth opportunities.

Keywords: CSR, social capital, risk, gubernatorial elections, tariff shocks, operational hedge

JEL Classification: G18, G32, G38

Suggested Citation

Andriosopoulos, Dimitris and Deepty, Sheikh Tanzila, Can Social Capital and Reputation Mitigate Political and Industry-Wide Risk? (October 20, 2020). Available at SSRN: https://ssrn.com/abstract=3316174 or http://dx.doi.org/10.2139/ssrn.3316174

Dimitris Andriosopoulos (Contact Author)

Strathclyde Business School ( email )

199 Cathedral Street
Department of Accounting and Finance
Glasgow, G4 0QU
United Kingdom
+44(0)1415483892 (Phone)

HOME PAGE: http://www.strath.ac.uk/staff/andriosopoulosdimitrisdr/

Sheikh Tanzila Deepty

Strathclyde Business School ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom

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