Firm Misvaluation and Corporate Social Responsibility

36 Pages Posted: 2 Jul 2019 Last revised: 27 Jun 2022

See all articles by Yaling Jin

Yaling Jin

Southwestern University of Finance and Economics

Date Written: May 16, 2022

Abstract

This paper shows that overvalued firms have better performance in corporate social responsibility. Using hypothetical mutual fund outflow pressure, I establish causality from misvaluation to corporate social responsibility performance. Further analysis reveals that the effect of firm misvaluation on corporate social responsibility performance is stronger for firms with greater financial strengths, higher socially responsible investor ownership, higher long-term institutional investor ownership, and during high corporate social responsibility sentiment periods. Overall, the results reveal the incentives of firms to engage in corporate social responsibility activities in overvaluation to cater to investors who prefer better corporate social responsibility performance.

Keywords: Corporate Social Responsibility, Financing policy, Mutual fund flow, Stock misvaluation

JEL Classification: G14, G32, M14

Suggested Citation

Jin, Yaling, Firm Misvaluation and Corporate Social Responsibility (May 16, 2022). Available at SSRN: https://ssrn.com/abstract=3412997 or http://dx.doi.org/10.2139/ssrn.3412997

Yaling Jin (Contact Author)

Southwestern University of Finance and Economics ( email )

Chengdu
China

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