Citation

Discussion Paper Details

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Title: Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence

Author(s): Rui Albuquerque, Yrj� Koskinen and Chendi Zhang

Publication Date: July 2013

Keyword(s): beta, corporate social responsibility, firm value, industry equilibrium, product differentiation and systematic risk

Programme Area(s): Financial Economics and Industrial Organization

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.

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Bibliographic Reference

Albuquerque, R, Koskinen, Y and Zhang, C. 2013. 'Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9533