Corporate Social Responsibility and Corporate Misconduct

42 Pages Posted: 30 Jun 2020 Last revised: 9 Feb 2021

See all articles by Daniel Ferrés

Daniel Ferrés

Universidad de Montevideo

Francisco Marcet

University of Chile- School of Economics and Business

Date Written: June 5, 2020

Abstract

We analyze whether price fixing firms modify their Corporate Social Responsibility (CSR) activities in anticipation of the revelation of a corporate misconduct. Our paper is the first empirical study to specifically explore the timing and the stability of the new CSR investments in firms involved in corporate misconduct. Our results show that firms that participate in illegal price fixing schemes increase their CSR initiatives around the time when they become the target of an antitrust investigation - not before. Moreover, the new CSR initiatives are mainly concentrated on improving positive CSR rather than in reducing further CSR concerns. Finally, we show that the new CSR efforts are not only associated with lower fines. We find that colluding firms tend to lose sales following a cartel breakup, although the decline in sales is less pronounced for those cartel firms that take anticipatory CSR actions to limit the negative impact of fraud revelation.

Keywords: Fraud; Collusion, CSR, Corporate Scandal

JEL Classification: G30,G34,G39

Suggested Citation

Ferrés, Daniel and Marcet, Francisco, Corporate Social Responsibility and Corporate Misconduct (June 5, 2020). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3620443 or http://dx.doi.org/10.2139/ssrn.3620443

Daniel Ferrés

Universidad de Montevideo ( email )

Puntas de Santiago 1604
Montevideo, Montevideo 11500
Uruguay

Francisco Marcet (Contact Author)

University of Chile- School of Economics and Business ( email )

Diagonal Paraguay 257
Floor 1003
Santiago, R. Metropolitana 7520421
Chile
+56-229783567 (Phone)

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