Corporate Social Responsibility and Its Impact on Firms’ Investment Policy, Organizational Strategy, and Performance

44 Pages Posted: 9 Dec 2012 Last revised: 28 Jan 2013

See all articles by Otgontsetseg Erhemjamts

Otgontsetseg Erhemjamts

Bentley University - Department of Finance; Bentley University

Qian Li

Dillard College of Business Administration

Anand Venkateswaran

Northeastern University - Finance and Insurance Area

Date Written: November 30, 2012

Abstract

This study examines the determinants of corporate social responsibility (CSR) and its implications on firms’ investment policy, organizational strategy and performance. First, we find that firms with better performance, higher R&D intensity, better financial health, and firms in new economy industries are more likely to engage in CSR activities, while riskier firms are less likely to do so. We also find U-shaped relation between firm size and CSR, indicating that either very small or very large firms exhibit high levels of CSR strengths and concerns. Next, we find that firms’ CSR strengths relate favorably with their investments, organizational strategy and performance whereas CSR concerns and firm attributes are by and large negatively related. Using a 2SLS procedure, we verify that the CSR-performance relation is robust to corrections for endogeneity through reverse causation and/or biases introduced by time varying omitted variables. Finally, we find that the CSR-firm attributes relation is strengthened when the CEO’s incentives are below the sample median, suggesting that CSR participation is especially important when monetary incentives are lower than benchmark levels.

Keywords: Corporate Social Responsibility, Firm Performance, Investment Policy, Organizational Strategy

JEL Classification: G34, M14, L21, L25, J33, M52

Suggested Citation

Erhemjamts, Otgontsetseg and Li, Qian and Venkateswaran, Anand, Corporate Social Responsibility and Its Impact on Firms’ Investment Policy, Organizational Strategy, and Performance (November 30, 2012). Journal of Business Ethics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2186627

Otgontsetseg Erhemjamts (Contact Author)

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States
781-891-2823 (Phone)

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States
781-891-2823 (Phone)
781-891-2896 (Fax)

Qian Li

Dillard College of Business Administration ( email )

3410 Taft Boulevard
Wichita Falls, TX usa 76308
United States

Anand Venkateswaran

Northeastern University - Finance and Insurance Area ( email )

Boston, MA 02115
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1,113
Abstract Views
5,499
rank
20,816
PlumX Metrics