Local Religious Norms, Corporate Social Responsibility, and Firm Value

53 Pages Posted: 9 Feb 2019

See all articles by Leon Zolotoy

Leon Zolotoy

University of Melbourne - Melbourne Business School

Don O'Sullivan

University of Melbourne - Melbourne Business School

Yangyang Chen

Hong Kong Polytechnic University - Faculty of Business

Date Written: January 28, 2019

Abstract

We explore the impact of religious norms on the relationship between corporate social responsibility (CSR) and firm value. Employing a longitudinal sample of publicly listed U.S. firms, we document that strong local religious norms in the area surrounding firms’ headquarters attenuate the positive effect of CSR on firm value. In cross-sectional analyses, we find that the attenuating effect of strong local religious norms is amplified for firms with heightened litigation risk. We also find that the positive effect of CSR on firm value is amplified for firms headquartered in areas where prevailing religious norms are more tolerant of risk-taking. Further, we find that strong religious norms attenuated the positive association between CSR and abnormal stock returns during the 2008-2009 financial crisis. Taken together, our findings cast local religious norms as an important contextual factor that influences the insurance value of CSR — the protection that CSR affords against stakeholder reactions to negative events.

Suggested Citation

Zolotoy, Leon and O'Sullivan, Don and Chen, Yangyang, Local Religious Norms, Corporate Social Responsibility, and Firm Value (January 28, 2019). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3324138

Leon Zolotoy (Contact Author)

University of Melbourne - Melbourne Business School ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia

Don O'Sullivan

University of Melbourne - Melbourne Business School ( email )

200 Leicester Street
Carlton, Victoria 3053 3186
Australia

Yangyang Chen

Hong Kong Polytechnic University - Faculty of Business ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

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