Walk the talk: The role of options markets in corporate social responsibility
56 Pages Posted: 1 Mar 2021 Last revised: 23 Nov 2022
Date Written: November 22, 2022
We find that firms with higher options trading engage more in corporate social responsibility (CSR). Possible channels include increased ownership by long-term and socially responsible investors, more CSR shareholder activism, higher product market competition, and enhanced governance associated with greater options trading. Furthermore, active options trading leads to improved environmental and firm performance (e.g., CO2 emissions reduction, waste recycling, market leadership, brand value, profitability, and client/shareholder loyalty) and more CSR investment. The causal relationship between options trading and CSR is confirmed using both difference-in-differences and instrumental variable approaches. Our evidence suggests that active options markets motivate companies to act responsibly and implement CSR practices.
Keywords: CSR; options trading; shareholder activism; informational efficiency; CSR investment
JEL Classification: G12; G23; M14
Suggested Citation: Suggested Citation