Walk the talk: The role of options markets in corporate social responsibility

56 Pages Posted: 1 Mar 2021 Last revised: 23 Nov 2022

See all articles by Fengfei Li

Fengfei Li

Deakin University - Deakin Business School

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Sichen Shen

The University of Hong Kong

Date Written: November 22, 2022

Abstract

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

Li, Fengfei and Lin, Chen and Lin, Tse-Chun and Shen, Sichen, Walk the talk: The role of options markets in corporate social responsibility (November 22, 2022). Available at SSRN: https://ssrn.com/abstract=3716260 or http://dx.doi.org/10.2139/ssrn.3716260

Fengfei Li (Contact Author)

Deakin University - Deakin Business School ( email )

Australia

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Sichen Shen

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
266
Abstract Views
1,058
rank
168,972
PlumX Metrics