Corporate social responsibility, stock prices, and tax policy

Amir Barnea, Robert Heinkel and Alan Kraus

Canadian Journal of Economics, 2013, vol. 46, issue 3, 1066-1084

Abstract: We model a market in which some investors get utility from owning shares of firms that engage in corporate social responsibility (CSR). In equilibrium, investors' CSR considerations influence portfolio choices, stock prices, and CSR spending. We study tax policy designed to maximize total giving (individual and corporate) net of government tax breaks and find that its effectiveness is nonmonotonic in the proportion of altruistic investors: with few or many altruistic investors, it has little impact on giving, but, at intermediate levels, effective tax policy intuitively relates the corporate tax rebate rate on giving and the cap on allowable tax savings.

Date: 2013
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