Corporate Social Responsibility, Shareholder Value, and Competition

Abstract

This study examines the relationship between corporate social responsibility (CSR), shareholder value, and competition by applying a regression discontinuity design to the outcome of CSR shareholder proposals. This approach effectively compares outcomes between proposals that pass or fail by a small margin which provides a causal estimate of the impact of CSR. I find that passing a proposal generates positive abnormal returns. This effect is stronger in firms with lower CSR scores, firms in more competitive industries, and firms subject to higher customer awareness. In addition, passing a proposal also increases the CSR scores of both firms and peers, suggesting that these votes induce higher CSR engagement by competitors. Finally, I identify an increase in the market share of companies that approve close-call proposals. Altogether, these results suggest that CSR improves shareholder value by enhancing the competitiveness of firms.

Keywords: Corporate Social Responsibility, CSR, ESG, Competition

JEL Classification: M14, D22, G14