Corporate Social Responsibility

Harrison Hong () and Edward Shore
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Harrison Hong: Department of Economics, Columbia University, New York, NY, USA
Edward Shore: Department of Economics, Columbia University, New York, NY, USA

Annual Review of Financial Economics, 2023, vol. 15, issue 1, 327-350

Abstract: Is shareholder interest in corporate social responsibility driven by pecuniary motives (abnormal rates of return) or nonpecuniary ones (willingness to sacrifice returns to address various firm externalities)? To answer this question, we summarize the literature by focusing on seven tests: (a) costs of capital, (b) performance of portfolios, (c) ownership by types of institutions, (d) surveys and experiments, (e) managerial motives, (f) shareholder proposals, and (g) firm inclusion in responsibility indices. These tests predominantly indicate that shareholders are driven by nonpecuniary motives. To stimulate further research on welfare implications for global warming, we assess whether estimates of the foregone returns for shareholders willing to reduce carbon emissions (or “greeniums”), along with the wealth pledged to firms that become sustainable, are consistent with the growth of aggregate investments in the decarbonization sector.

Keywords: externalities; responsible shareholder mandates; sustainable finance; greeniums; corporate decarbonization (search for similar items in EconPapers)
JEL-codes: G1 G10 G12 G14 G17 G19 G2 G20 G21 G23 G3 G31 G35 G39 G4 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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DOI: 10.1146/annurev-financial-111021-094347

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