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Corporate social responsibility, stakeholder risk, and idiosyncratic volatility

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  • Becchetti, Leonardo
  • Ciciretti, Rocco
  • Hasan, Iftekhar

Abstract

Idiosyncratic volatility (IV) is a measure of firm specific information that is correlated with lower stock returns. We explore the nexus between IV and corporate social responsibility (CSR) and document that IV is positively correlated with aggregate CSR and is negatively correlated with a CSR-specific (stakeholder) risk factor. Our findings are consistent with the view that CSR reduces flexibility in responding to productive shocks via the reduction of stakeholder well-being, thereby producing the combined effect of making earnings less predictable and reducing exposure to risk of conflicts with stakeholders.

Suggested Citation

  • Becchetti, Leonardo & Ciciretti, Rocco & Hasan, Iftekhar, 2015. "Corporate social responsibility, stakeholder risk, and idiosyncratic volatility," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 297-309.
    • Handle: RePEc:eee:corfin:v:35:y:2015:i:c:p:297-309
    DOI: 10.1016/j.jcorpfin.2015.09.007
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    More about this item

    Keywords

    Idiosyncratic volatility; Corporate social responsibility; Stakeholder risk;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F30 - International Economics - - International Finance - - - General
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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