The Impact of Corporate Social Responsibility on Risk Taking and Firm Value

Maretno Harjoto () and Indrarini Laksmana ()
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Maretno Harjoto: Pepperdine University
Indrarini Laksmana: Kent State University

Journal of Business Ethics, 2018, vol. 151, issue 2, No 5, 353-373

Abstract: Abstract We hypothesize that CSR serves as a control mechanism to reduce deviations from optimal risk taking, and therefore, CSR curbs excessive risk taking and reduces excessive risk avoidance. Based on the stakeholder theory, firms with CSR focus must balance the interests of multiple stakeholders, and therefore, managers must allocate resources to satisfy both investing and non-investing stakeholders’ interests. Using five measures of corporate risk taking and a sample of 1718 US firms during 1998 to 2011, we find that stronger CSR performance is associated with smaller deviations from optimal risk taking levels. We examine the mechanism through which CSR has an impact on firm value and find a positive indirect impact of CSR on firm value through the impact of CSR on risk taking. CSR performance is positively associated with firm value because CSR reduces excessive risk taking and risk avoidance.

Keywords: Corporate social responsibility; Risk taking; Stakeholders; Firm value (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 G38 G39 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (93)

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DOI: 10.1007/s10551-016-3202-y

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