Corporate social responsibility and firm financial risk reduction: On the moderating role of the legal environment

Mohammed Benlemlih and Isabelle Girerd-Potin ()
Additional contact information
Mohammed Benlemlih: CERAG - Centre d'études et de recherches appliquées à la gestion - UGA [2016-2019] - Université Grenoble Alpes [2016-2019]
Isabelle Girerd-Potin: CERAG - Centre d'études et de recherches appliquées à la gestion - UGA [2016-2019] - Université Grenoble Alpes [2016-2019]

Post-Print from HAL

Abstract: Approaching the institutional environment through its regulative component, we distinguish between shareholder‐oriented and stakeholder‐oriented countries. Identifying first this classification with the distinction between common law versus civil law countries and using a large sample of 5,716 firm‐year observations that represents 1,169 individual firms in 25 countries between 2001 and 2011, we show that Corporate Social Responsibility (CSR) significantly reduces firms' idiosyncratic risk in civil law countries but not in common law countries. Using then a more direct classification based on shareholder and employee protection scores, our findings suggest that CSR negatively affects firms' idiosyncratic and systematic risks only in less shareholder‐oriented and more stakeholder‐oriented countries, respectively. These findings are similar in the different components of CSR with two notable exceptions: a high score in corporate governance reduces firm risk only in common law countries, and community involvement increases idiosyncratic risk in more shareholder‐oriented and less stakeholder‐oriented countries, respectively. Taken together, our results strongly support the view that the relationship between CSR and financial risk is moderated by the institutional context of the firm.

Keywords: Corporate social responsibility CSR; Financing policy; Financial risk and risk management; Capital and Ownership Structure (search for similar items in EconPapers)
Date: 2017-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

Published in Journal of Business Finance and Accounting, 2017, 44 (7-8), pp.1137-1166. ⟨10.1111/jbfa.12251⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01977064

DOI: 10.1111/jbfa.12251

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().