Does Corporate Social Responsibility Create Shareholder Value? The Importance of Long-Term Investors
66 Pages Posted: 30 Apr 2013 Last revised: 27 Nov 2017
Date Written: November 25, 2017
We study the effect of corporate social responsibility (CSR) on shareholder value. We argue that long-term investors can ensure that managers choose the amount of CSR that maximizes shareholder value. We find that long-term investors do increase the value to shareholders of CSR activities, not through higher cash flow but rather through lower cash flow risk. Following prior work, we use indexing by investors and state laws on stakeholder orientation for identification. Our findings suggest that CSR activities can create shareholder value as long as managers are properly monitored by long-term investors.
Keywords: Agency problems; Corporate governance; Monitoring; Managerial myopia; Investor horizons; Shareholders; Stakeholders; Corporate social responsibility; Investment; Intangibles; Valuation; Profitability; Volatility; Return; Risk
JEL Classification: G12, G23, G31, G32, G34, L21, M14
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