Crime, Punishment and the Value of Corporate Social Responsibility

62 Pages Posted: 6 Sep 2014 Last revised: 22 Mar 2016

See all articles by Harrison G. Hong

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Inessa Liskovich

University of Texas at Austin - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: March 21, 2016

Abstract

Using enforcements of the Foreign Corrupt Practices Act, we find that socially responsible firms receive more lenient settlements from prosecutors and have higher resulting market valuations. Corporate social responsibility (CSR) is uncorrelated with bribe attributes, which should entirely determine sanctions following Becker (1974). It is also not an explicit factor in sentencing guidelines. Yet, a one standard deviation increase in CSR is associated with 5 million dollars less in fines, or 25% lower than the mean and less costly subsequent monitoring. High CSR firms out-perform low CSR firms by 2.4% in the six months following the announcement of the settlement.

Keywords: Corporate Social Responsibility, Foreign Corrupt Practices Act

JEL Classification: D2, D21, D6, D63, D64, G3, G30, G38, K3, K30, K42, M1, M14, M3, M37

Suggested Citation

Hong, Harrison G. and Liskovich, Inessa, Crime, Punishment and the Value of Corporate Social Responsibility (March 21, 2016). Available at SSRN: https://ssrn.com/abstract=2492202 or http://dx.doi.org/10.2139/ssrn.2492202

Harrison G. Hong (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Inessa Liskovich

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

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