Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence

Forthcoming in Management Science, DOI/10.1287/mnsc.2018.3043

19 Pages Posted: 28 Nov 2018

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)

Yrjo Koskinen

Haskayne School of Business, University of Calgary

Chendi Zhang

University of Warwick - Finance Group

Multiple version iconThere are 2 versions of this paper

Date Written: November 16, 2018

Abstract

This paper presents an industry equilibrium model where firms have a choice to engage in corporate social responsibility (CSR) activities. We model CSR as an investment to increase product differentiation that allows 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, product differentiation, systemic risk, beta, firm value, industry equilibrium

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

Suggested Citation

Albuquerque, Rui A. and Koskinen, Yrjo J and Zhang, Chendi, Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence (November 16, 2018). Forthcoming in Management Science, DOI/10.1287/mnsc.2018.3043. Available at SSRN: https://ssrn.com/abstract=3286367

Rui A. Albuquerque

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

Yrjo J Koskinen (Contact Author)

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

Chendi Zhang

University of Warwick - Finance Group ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

Register to save articles to
your library

Register

Paper statistics

Downloads
80
Abstract Views
302
rank
297,803
PlumX Metrics