Does Firm-Level Political Risk Influence Corporate Social Responsibility (CSR)? Evidence from Earnings Conference Calls

42 Pages Posted: 22 Mar 2021

See all articles by Pattanaporn Chatjuthamard

Pattanaporn Chatjuthamard

Sasin GIBA

Sirimon Treepongkaruna

The University of Western Australia; Financial Research Network (FIRN)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Napatsorn (Pom) Jiraporn

State University of New York (SUNY) - State University of New York (SUNY) at Oswego

Date Written: March 9, 2021

Abstract

Exploiting a novel measure of firm-level political risk based on earnings conference calls, we explore the effect of political exposure on corporate social responsibility (CSR). We show that firms more exposed to political risk invest significantly more in CSR activities. This finding is consistent with the risk-mitigation hypothesis, which posits that CSR produces moral capital that safeguards the firm in case of a negative event. Hence, firms exposed to more political risk engage in more CSR activities to take advantage of its insurance-like effect. An increase in political exposure by one standard deviation raises CSR engagement by 27.95%.

Keywords: Corporate social responsibility, CSR, instrumental variable, political exposure, political risk, risk mitigation

JEL Classification: M 14, P16, G18, G38

Suggested Citation

Chatjuthamard, Pattanaporn and Treepongkaruna, Sirimon and Jiraporn, Pornsit and Jiraporn, Napatsorn (Pom), Does Firm-Level Political Risk Influence Corporate Social Responsibility (CSR)? Evidence from Earnings Conference Calls (March 9, 2021). Available at SSRN: https://ssrn.com/abstract=3800701 or http://dx.doi.org/10.2139/ssrn.3800701

Pattanaporn Chatjuthamard

Sasin GIBA ( email )

Bangkok
Thailand

Sirimon Treepongkaruna

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
+61864887853 (Phone)
+61864881086 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Napatsorn (Pom) Jiraporn

State University of New York (SUNY) - State University of New York (SUNY) at Oswego ( email )

7060 NY-104
Oswego, NY 13126-3599
United States

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