Corporate Social Responsibility, Corporate Governance, and Managerial Risk-Taking
80 Pages Posted: 18 May 2014
Date Written: May 15, 2014
This paper investigates the association between corporate social responsibility (CSR) and managerial risk-taking, as well as the differences in governance structure that affect this association. Using a sample of US public firms, we find that firms with strong CSR records engage in higher risk-taking. Furthermore, we find that accounting for differences in governance structure substantially accentuates this relationship. Prior literature establishes that high managerial risk-tolerance is necessary for the undertaking of risky yet profitable investment decisions. Thus, these findings suggest that CSR, rather than being a waste of scarce corporate resources, is instead an important aspect of shareholder value creation. They contribute to the debate on CSR by documenting that corporate risk-taking is one mechanism among others through which CSR maps into higher firm value.
Keywords: Corporate social responsibility, corporate governance, managerial risk taking, panel regression
JEL Classification: G30; G21; C33
Suggested Citation: Suggested Citation