The Heterogeneous Impact of Corporate Social Responsibility Activities that Target Different Stakeholders

44 Pages Posted: 12 Sep 2013

See all articles by Kiyoung Chang

Kiyoung Chang

University of South Florida Sarasota-Manatee - College of Business

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship

Ying Li

University of Washington, Bothell - Business

Date Written: August 28, 2013

Abstract

We aggregate different dimensions of corporate social responsibility (CSR) activities following the stakeholder framework proposed in Clarkson (1995) and present consistent evidence that CSR strengths targeting different stakeholders have their unique impact on firm risk and financial performance. Institutional CSR (ICSR) activities that target secondary stakeholders are negatively associated with firm risk, measured by total risk and systematic risk. Technical CSR (TCSR) that target primary stakeholders are positively associated with firm financial performance, measured by Tobin’s Q, ROA, and cash flow returns. Our results, based on a sample of S&P 500 component firms over the period of 1995-2009, are consistent with the risk management view of “altruistic” CSR activities and with the stakeholder salience theory. We also show that the impact of CSR activities on risk varies with the ethical climate, as proved in our sub-sample analyses on pre- and post-Sarbanes-Oxley periods. Our empirical analyses mitigate possible omitted variables and endogeneity concerns that are often overlooked in previous research. Our findings are robust to alternative CSR measures, to alternative risk, and performance measures, and to alternative estimation methods.

Keywords: institutional CSR, technical CSR, firm risk, financial performance

JEL Classification: G30

Suggested Citation

Chang, Kiyoung and Kim, Incheol and Li, Ying, The Heterogeneous Impact of Corporate Social Responsibility Activities that Target Different Stakeholders (August 28, 2013). Available at SSRN: https://ssrn.com/abstract=2323797 or http://dx.doi.org/10.2139/ssrn.2323797

Kiyoung Chang (Contact Author)

University of South Florida Sarasota-Manatee - College of Business ( email )

8350 N. Tamiami Trail, SMC-C263
Sarasota, FL 34243-2025
United States
9413594359 (Phone)
9413594367 (Fax)

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship ( email )

1201 W University Dr
Edinburg, TX 78539
United States

Ying Li

University of Washington, Bothell - Business ( email )

18115 Campus Way NE
Bothell, WA 98011-8246
United States

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