Estimating the Effect of Corporate Social Responsibility (CSR) on Firm Value Using Geographic Identification

Asia-Pacific Journal of Financial Studies (Forthcoming)

52 Pages Posted: 29 Dec 2016

See all articles by Pornsit Jiraporn

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Pandej Chintrakarn

Mahidol University International College (MUIC)

Travis Davidson

Ohio University - Department of Finance

Napatsorn (Pom) Jiraporn

State University of New York (SUNY) - State University of New York (SUNY) at Oswego

Date Written: December 24, 2016

Abstract

We argue that firms located close to one another tend to have similar CSR policies, due to investor clienteles, local competition, as well as social interactions. Our results are consistent with this notion. In particular, firms located in the same 3-digit zip code exhibit a similar degree of CSR. Exploiting the variation in CSR across the zip codes, we estimate the effect of CSR on firm value. Part of the firm’s CSR is induced by the surrounding firms in the same zip code and can be considered exogenous as it is determined outside the firm. Because zip code allocation is based on efficiency in mail delivery, and not on corporate policies or outcomes, it is likely exogenous. Our instrumental variable (IV) analysis reveals that more socially responsible firms enjoy significantly higher firm value. We confirm the results using phone number area codes, instead of zip codes, and reach the same conclusion.

Keywords: corporate social responsibility, geography, firm value, CSR, social responsibility

JEL Classification: G32, G34

Suggested Citation

Jiraporn, Pornsit and Chintrakarn, Pandej and Davidson, Travis and Jiraporn, Napatsorn (Pom), Estimating the Effect of Corporate Social Responsibility (CSR) on Firm Value Using Geographic Identification (December 24, 2016). Asia-Pacific Journal of Financial Studies (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2890550

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Pandej Chintrakarn

Mahidol University International College (MUIC) ( email )

999 Buddhamonthon 4 Road
Salaya, Nakhonpathom, 73170
Thailand

Travis Davidson

Ohio University - Department of Finance ( email )

640 Copeland
Athens, OH 45701
United States

Napatsorn (Pom) Jiraporn

State University of New York (SUNY) - State University of New York (SUNY) at Oswego ( email )

7060 NY-104
Oswego, NY 13126-3599
United States

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