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

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.