Does Corporate Social Responsibility Create Shareholder Value? The Importance of Long-Term Investors

66 Pages Posted: 30 Apr 2013 Last revised: 27 Nov 2017

See all articles by Phuong-Anh Nguyen

Phuong-Anh Nguyen

York University

Ambrus Kecskes

York University - Schulich School of Business

Sattar Mansi

Virginia Polytechnic Institute & State University

Date Written: November 25, 2017

Abstract

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

Suggested Citation

Nguyen, Phuong-Anh and Kecskes, Ambrus and Mansi, Sattar, Does Corporate Social Responsibility Create Shareholder Value? The Importance of Long-Term Investors (November 25, 2017). Available at SSRN: https://ssrn.com/abstract=2257846 or http://dx.doi.org/10.2139/ssrn.2257846

Phuong-Anh Nguyen

York University

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Ambrus Kecskes (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Sattar Mansi

Virginia Polytechnic Institute & State University ( email )

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