Are Red or Blue Companies More Likely to Go Green? Politics and Corporate Social Responsibility

55 Pages Posted: 5 Nov 2012

See all articles by Alberta Di Giuli

Alberta Di Giuli

ESCP Europe - Department of Finance

Leonard Kostovetsky

Carroll School of Management, Boston College

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2011

Abstract

We examine whether the political leanings of a firm’s stakeholders affect its behavior in terms of corporate social responsibility (CSR). Using firm-level CSR ratings from Kinder, Lydenberg, Domini (KLD), we find that firms score higher on CSR when they have Democratic rather than Republican founders, CEOs, and directors, and when they are headquartered in Democratic rather than Republican-leaning states. We estimate that CSR costs Democratic-leaning firms approximately $20 million more in annual SG&A expenses than Republican-leaning firms ($80 million more within the sample of S&P500 firms), representing about 10% of net income. We find little evidence that our results can be explained by reverse causality or self-selection.

Suggested Citation

Di Giuli, Alberta and Kostovetsky, Leonard, Are Red or Blue Companies More Likely to Go Green? Politics and Corporate Social Responsibility (December 1, 2011). 29th International Conference of the French Finance Association (AFFI) 2012. Available at SSRN: https://ssrn.com/abstract=2084900 or http://dx.doi.org/10.2139/ssrn.2084900

Alberta Di Giuli (Contact Author)

ESCP Europe - Department of Finance ( email )

Paris Campus
79, Avenue de la Republique
Paris, 75543
France

Leonard Kostovetsky

Carroll School of Management, Boston College ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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