Firm Value in Commonly Uncertain Times: The Divergent Effects of Corporate Governance and CSR

39 Pages Posted: 1 Apr 2019

See all articles by Richard Borghesi

Richard Borghesi

University of South Florida-Sarasota

Kiyoung Chang

University of South Florida Sarasota-Manatee - College of Business

Ying Li

University of Washington, Bothell - Business

Date Written: March 4, 2019

Abstract

Economic uncertainty disrupts firms’ ability to create value. Most related literature examines how various organizational characteristics affect value under extreme conditions – the global financial crisis. However, recent work in quantifying economic uncertainty now makes it possible to take a more nuanced approach in investigating the conditions under which this value reduction can be mitigated during more ‘commonly uncertain’ periods. In this paper we analyze the effects of corporate governance mechanisms and social responsibility investments on Tobin’s q across 13 years and 40 countries. Evidence suggests that shareholder-centric corporate governance policies restrict board and executive flexibility during uncertain times, and therefore stifle their ability to react effectively to adverse macroeconomic changes. We also find that CSR initiatives serve as insurance in that they preserve value under uncertainty by acting as a reservoir of social capital.

Keywords: economic policy uncertainty, corporate governance, corporate social responsibility, firm value

JEL Classification: G28, G32, G34, G38

Suggested Citation

Borghesi, Richard and Chang, Kiyoung and Li, Ying, Firm Value in Commonly Uncertain Times: The Divergent Effects of Corporate Governance and CSR (March 4, 2019). Available at SSRN: https://ssrn.com/abstract=3349426 or http://dx.doi.org/10.2139/ssrn.3349426

Richard Borghesi (Contact Author)

University of South Florida-Sarasota ( email )

8350 N. Tamiami Trail
Sarasota, FL 34243-2049
United States
941-359-4524 (Phone)
941-359-4367 (Fax)

HOME PAGE: http://usfsm.edu/academics/faculty-listing/dr-richard-borghesi.aspx

Kiyoung Chang

University of South Florida Sarasota-Manatee - College of Business ( email )

8350 N. Tamiami Trail, SMC-C263
Sarasota, FL 34243-2025
United States
9413594359 (Phone)
9413594367 (Fax)

Ying Li

University of Washington, Bothell - Business ( email )

18115 Campus Way NE
Bothell, WA 98011-8246
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
24
Abstract Views
379
PlumX Metrics