Aiming for Average: The Effect of Peer Standing on the Dynamic Process of Corporate Social Responsibility

56 Pages Posted: 14 Dec 2011 Last revised: 13 Nov 2013

See all articles by David K. Ding

David K. Ding

Singapore Management University - Lee Kong Chian School of Business

Christo Ferreira

Massey University

Udomsak Wongchoti

Massey University - School of Economics and Finance

Date Written: August 12, 2012

Abstract

We evidence a non-linear relationship between firm value and corporate social responsibility, adding to the mixed evidence on this relationship. We show that corporate social responsibility exhibits a dynamic process, which is largely dependent on a firm’s industry, relative standing amongst peers and the distinction between responsible and irresponsible behavior. Surprisingly, we find that responsible behavior could sometimes destroy firm value, while irresponsible behavior could sometimes increase firm value. Endogeneity is mitigated through a novel process that allows us to keep constant the endogeneity inherent in this field, examining corporate social responsibility’s effect on firm value separately.

Keywords: Corporate Social Responsibility, CSR, Environmental Social Governance, ESG

JEL Classification: M14, G30, G32

Suggested Citation

Ding, David K. and Ferrreira, Christoffel Jacobus and Wongchoti, Udomsak, Aiming for Average: The Effect of Peer Standing on the Dynamic Process of Corporate Social Responsibility (August 12, 2012). 2012 Financial Markets & Corporate Governance Conference. Available at SSRN: https://ssrn.com/abstract=1971484 or http://dx.doi.org/10.2139/ssrn.1971484

David K. Ding

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore
+65 6828-0245 (Phone)

Christoffel Jacobus Ferrreira (Contact Author)

Massey University ( email )

Private Bag 11 222
Palmerston North, Manawatu 4442
New Zealand

Udomsak Wongchoti

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

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