The Effect of Social CSR on Labor Investment Decisions: Theory and International Evidence

Rafael Palmeira and Julio Pindado

Corporate Social Responsibility and Environmental Management, 2025, vol. 32, issue 3, 3027-3048

Abstract: This study analyzes how the social aspects of corporate social responsibility (CSR) influence firms' labor investment decisions. We provide new evidence using an international sample of 612 companies in 30 countries from 2012 to 2019; we use the generalized method of moments for our estimations. Our empirical analysis shows that increasing social CSR leads to labor overinvestment but reduces labor underinvestment. Our results also demonstrate that employment protection legislation limits the effects of social CSR on labor underinvestment. In conclusion, this study disentangles the relationship between social CSR and labor investment decisions. Finally, we discuss some relevant practical implications for managers and shareholders as we reveal the effect of social CSR on labor investment decisions and suggest a substitution effect between social CSR efforts and employment protection legislation.

Date: 2025
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https://doi.org/10.1002/csr.3109

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Persistent link: https://EconPapers.repec.org/RePEc:wly:corsem:v:32:y:2025:i:3:p:3027-3048

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