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Corporate Social Responsibility

Author

Listed:
  • Harrison Hong

    (Department of Economics, Columbia University, New York, NY, USA)

  • Edward Shore

    (Department of Economics, Columbia University, New York, NY, USA)

Abstract

Is shareholder interest in corporate social responsibility driven by pecuniary motives (abnormal rates of return) or nonpecuniary ones (willingness to sacrifice returns to address various firm externalities)? To answer this question, we summarize the literature by focusing on seven tests: (a) costs of capital, (b) performance of portfolios, (c) ownership by types of institutions, (d) surveys and experiments, (e) managerial motives, (f) shareholder proposals, and (g) firm inclusion in responsibility indices. These tests predominantly indicate that shareholders are driven by nonpecuniary motives. To stimulate further research on welfare implications for global warming, we assess whether estimates of the foregone returns for shareholders willing to reduce carbon emissions (or “greeniums”), along with the wealth pledged to firms that become sustainable, are consistent with the growth of aggregate investments in the decarbonization sector.

Suggested Citation

  • Harrison Hong & Edward Shore, 2023. "Corporate Social Responsibility," Annual Review of Financial Economics, Annual Reviews, vol. 15(1), pages 327-350, November.
    • Handle: RePEc:anr:refeco:v:15:y:2023:p:327-350
    DOI: 10.1146/annurev-financial-111021-094347
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    Citations

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    Cited by:

    1. Laszlo Goerke & Nora Paulus, 2024. "Collective bargaining about corporate social responsibility," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(4), pages 1285-1313, November.
    2. Ivan Diaz-Rainey & Paul A. Griffin & David H. Lont & Antonio J. Mateo-Márquez & Constancio Zamora-Ramírez, 2024. "Shareholder Activism on Climate Change: Evolution, Determinants, and Consequences," Journal of Business Ethics, Springer, vol. 193(3), pages 481-510, September.

    More about this item

    Keywords

    externalities; responsible shareholder mandates; sustainable finance; greeniums; corporate decarbonization;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G2 - Financial Economics - - Financial Institutions and Services
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • G4 - Financial Economics - - Behavioral Finance

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