The non-linear effect of CSR on firms’ systematic risk: International evidence

Tazrina Farah, Jialong Li, Zhicheng Li and Abul Shamsuddin ()

Journal of International Financial Markets, Institutions and Money, 2021, vol. 71, issue C

Abstract: This study examines the nonlinear effects of corporate social responsibility (CSR) on firms’ systematic risk and identifies the degree of operating leverage as a channel through which CSR exerts its influence on firm risk. Using a large international sample of firms from 43 countries for the period 2005–2017, we find that the relationship between CSR and firms’ systematic risk is nonlinear, exhibiting an inverted U-shaped pattern. More specifically, our results show that initially risk rises with an increase in CSR but after reaching a threshold level of CSR, firms experience risk reduction as CSR increases. The CSR–risk relationship is moderated by a few country-specific factors, namely national CSR sustainability and legal environment. Our findings are robust to controlling for potential endogeneity of CSR.

Keywords: CSR; Systematic risk; Degree of operating leverage; Inverted U-shape (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:71:y:2021:i:c:s104244312100007x

DOI: 10.1016/j.intfin.2021.101288

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