Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence

64 Pages Posted: 9 Jul 2013

See all articles by Rui A. Albuquerque

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Art Durnev

University of Iowa - Henry B. Tippie College of Business

Yrjo Koskinen

Haskayne School of Business, University of Calgary

Multiple version iconThere are 2 versions of this paper

Date Written: July 2013

Abstract

This paper presents an industry equilibrium model where firms have a choice to engage in corporate social responsibility (CSR) activities. We model CSR activities as a product differentiation strategy allowing firms to benefit from higher profit margins. The model predicts that CSR decreases systematic risk and increases firm value and that these effects are stronger for firms with high product differentiation. We find supporting evidence for our predictions. We address a potential endogeneity problem by instrumenting CSR using data on the political affiliation of the firm’s home state.

Keywords: corporate social responsibility, corporate valuation, customer loyalty, industry equilibrium, systematic risk

JEL Classification: D43, G12, G32, L13, M14

Suggested Citation

Albuquerque, Rui A. and Durnev, Artyom and Koskinen, Yrjo J, Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence (July 2013). CEPR Discussion Paper No. DP9533. Available at SSRN: https://ssrn.com/abstract=2291334

Rui A. Albuquerque (Contact Author)

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://ruialbuquerque.webs.com

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Artyom Durnev

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
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Iowa City, IA 52242-1000
United States
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(514) 398-3876 (Fax)

HOME PAGE: http://www.artdurnev.com

Yrjo J Koskinen

Haskayne School of Business, University of Calgary ( email )

SH 154, 2500 University Drive NW
Calgary, Alberta T2N 1N4
Canada
+1-403-220-5540 (Phone)

HOME PAGE: http://haskayne.ucalgary.ca/haskayne_info/profiles/yrjo-koskinen

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