Corporate social responsibility and firm risk: theory and empirical evidence
Albuquerque, R; Koskinen, Y; Zhang, C
Date: 16 November 2019
Journal
Management Science
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Publisher DOI
Abstract
This paper presents an industry equilibrium model where firms have a choice
to engage in corporate social responsibility (CSR) activities. We model CSR as an investment to increase product differentiation that allows firms to benefit from higher profit
margins. The model predicts that CSR decreases systematic risk and increases firm ...
This paper presents an industry equilibrium model where firms have a choice
to engage in corporate social responsibility (CSR) activities. We model CSR as an investment to increase product differentiation that allows firms to benefit from higher profit
margins. The model predicts that CSR decreases systematic risk and increases firm value
and that these effects are stronger for firms with high product differentiation. We find
supporting evidence for our predictions. We address a potential endogeneity problem by
instrumenting CSR using data on the political affiliation of the firm’s home state.
Finance and Accounting
Faculty of Environment, Science and Economy
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