Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence

Koskinen, Yrjö, Rui Albuquerque and Chendi Zhang

No 9533, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper presents an industry equilibrium model where firms have a choice to engage in corporate social responsibility (CSR) activities. We model CSR activities as a product differentiation strategy allowing firms to benefit from higher profit margins. The model predicts that CSR decreases systematic risk and increases firm value and that these effects are stronger for firms with high product differentiation. We find supporting evidence for our predictions. We address a potential endogeneity problem by instrumenting CSR using data on the political affiliation of the firm's home state.

Keywords: Firm value; Corporate social responsibility; Systematic risk; Product differentiation; Beta; Industry equilibrium (search for similar items in EconPapers)
JEL-codes: D43 G12 G32 L13 M14 (search for similar items in EconPapers)
Date: 2013-07
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Citations: View citations in EconPapers (18)

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