Does corporate sustainability mitigate firm risk? An empirical analysis on S&P 500 controversial companies

Mauro Sciarelli, Giovanni Landi, Lorenzo Turriziani and Anna Prisco

Social Responsibility Journal, 2023, vol. 20, issue 1, 38-58

Abstract: Purpose - This study aims to explore the impact of controversial firms’ corporate sustainability assessments on their risk exposure according to the environmental, social and governance (ESG) paradigm. Design/methodology/approach - This study conducts a cross-sectional study using the ordinary least squares approach to test how corporate social responsibility practices affect firms’ risk exposure, testing the three single impacts of ESG components and the impact of an overall ESG assessment. This study considers the largest Standard & Poor’s (S&P) 500 stock market index companies and focus on a double-risk measurement – systematic and idiosyncratic – developing an empirical study on 132 controversial companies listed on the S&P index. Findings - Empirical findings indicate that the overall ESG assessment and the environmental and social sub-dimensions decrease idiosyncratic firm risk. At the same time, no significant results are found according to the systematic risk component. Originality/value - This study fits into the domain of risk management research, investigating whether additional and non-financial disclosures regarding sustainability issues decrease information asymmetries, improving investors’ decision-making and stakeholders’ relations. Prior literature has shown limited evidence on the relationship between corporate social performance (CSP) and firm risk based on controversial companies. The main contribution is to consider the controversy as an independent factor from the industry sector, given that the implications of CSP actions and practices are mainly firm-specific.

Keywords: Corporate social performance; Firm risk; Controversial companies; Corporate sustainability assessment; ESG ratings; Idiosyncratic and systematic risk (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:srjpps:srj-09-2021-0388

DOI: 10.1108/SRJ-09-2021-0388

Access Statistics for this article

Social Responsibility Journal is currently edited by Prof David Crowther

More articles in Social Responsibility Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().