Doing Safe by Doing Good: Non-Financial Reporting and the Risk Effects of Corporate Social Responsibility

Christina Bannier, Yannik Bofinger and Björn Rock

European Accounting Review, 2023, vol. 32, issue 4, 903-933

Abstract: We compare the effects of corporate social responsibility (CSR) on firms' equity risk under two different (non-)financial reporting regimes: the risk-based U.S. and the content-based EU system. We observe a strongly negative CSR-risk relation in the EU, but a much weaker general impact in the U.S. In correspondence with goal-framing theory, we find several moderating effects on this association, depending on the reporting regime: (i) A highly volatile market environment unfolds the risk-reducing effect of CSR in the U.S. system, but has no moderating effect in the EU; (ii) Rising CSR awareness buttresses the risk-reducing effect of CSR in the EU, but has an opposing effect in the U.S.; (iii) Risk reductions are most strongly associated with social and governance rather than environmental activity in the EU regime, while there are no such individual effects in the U.S.

Date: 2023
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DOI: 10.1080/09638180.2022.2042349

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