The Influence of Corporate Social Responsibility on Investment Efficiency and Innovation

44 Pages Posted: 25 Apr 2019

See all articles by Kirsten A. Cook

Kirsten A. Cook

Texas Tech University - Area of Accounting

Andrea Romi

Texas Tech University - Area of Accounting

Daniela Sánchez

University of Texas at San Antonio

Juan Manuel Sanchez

University of Texas at San Antonio

Multiple version iconThere are 2 versions of this paper

Date Written: March/April 2019

Abstract

We examine two important channels through which corporate social responsibility (CSR) affects firm value: investment efficiency and innovation. We find that firms with higher CSR performance invest more efficiently: these firms are less prone to invest in negative net present value (NPV) projects (overinvestment) and less prone to forego positive NPV projects (underinvestment). We also find that firms with higher CSR performance generate more patents and patent citations. Mediation analysis indicates that firms with higher CSR performance are more profitable and valuable, consequences partially attributable to efficient investments and innovation. These results, robust to alternate model specifications, lend support to enlightened stakeholder theory.

Keywords: corporate social responsibility, firm performance, innovation, investment efficiency, mediation

Suggested Citation

Cook, Kirsten A. and Romi, Andrea and Sánchez, Daniela and Sanchez, Juan Manuel, The Influence of Corporate Social Responsibility on Investment Efficiency and Innovation (March/April 2019). Journal of Business Finance & Accounting, Vol. 46, Issue 3-4, pp. 494-537, 2019, Available at SSRN: https://ssrn.com/abstract=3377612 or http://dx.doi.org/10.1111/jbfa.12360

Kirsten A. Cook

Texas Tech University - Area of Accounting ( email )

P.O. Box 42101
Lubbock, TX 79409
United States

Andrea Romi

Texas Tech University - Area of Accounting ( email )

P.O. Box 42101
Lubbock, TX 79409
United States

Daniela Sánchez

University of Texas at San Antonio ( email )

Juan Manuel Sanchez (Contact Author)

University of Texas at San Antonio ( email )

One UTSA Circle
San Antonio, TX 78249
United States

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