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CSR engagement and financial risk: A virtuous circle? International evidence

Pierre Chollet and Blaise W. Sandwidi

Global Finance Journal, 2018, vol. 38, issue C, 65-81

Abstract: This paper investigates the complex relationship between the financial risk of firms and their engagement in corporate social responsibility (CSR), measured by Thomson Reuters ASSET4 environmental, social, and governance scores. Financial risk is estimated by the usual proxies: systematic, firm-specific, and total risks. Analyzing an international sample of 23,194 firm-year observations from 2003 to 2012 by using a panel vector autoregressive (VAR) model with generalized method of moments (GMM) estimations, we demonstrate a virtuous circle between corporate social performance (CSP) and risk (specific and total). More specifically, we show that a firm's good social and governance performance reduces its financial risk and thereby reinforces its commitment to good governance and environmental practices.

Keywords: Corporate financial risk; Corporate social responsibility; Corporate social performance; ESG scores; Virtuous circle (search for similar items in EconPapers)
JEL-codes: G32 G34 M14 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (62)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:38:y:2018:i:c:p:65-81

DOI: 10.1016/j.gfj.2018.03.004

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