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Timing corporate social responsibility investments: A dynamic investment model and empirical evidence

Author

Listed:
  • Kupfer, Stefan
  • Prysyazhna, Vladlena
  • Lukas, Elmar
  • Mölls, Sascha

Abstract

We study the optimal timing of corporate social responsibility (CSR) investments, providing model-theoretical rationale as well as empirical evidence. Using a dynamic investment model under costly external financing, we can relate a production economic perspective to CSR investments. The approach allows us to investigate energy efficiency of production and, hence, the corresponding CSR measures. Our model suggests that external financing costs can delay investment, increasing production but reducing its energy efficiency for a given level of productivity increase. Using a unique dataset of CSR reporting supplemented by corporate governance and financial data, we calculate the maximum likelihood estimates of the hazard of investing in CSR projects. Empirical findings suggest that factors such as productivity, geographical diversification, market risks, investment and financing costs, ownership concentration, and technological risks significantly influence investment timing.

Suggested Citation

  • Kupfer, Stefan & Prysyazhna, Vladlena & Lukas, Elmar & Mölls, Sascha, 2025. "Timing corporate social responsibility investments: A dynamic investment model and empirical evidence," Energy Economics, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:eneeco:v:143:y:2025:i:c:s0140988325000192
    DOI: 10.1016/j.eneco.2025.108196
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    Keywords

    Corporate social responsibility; Energy efficiency; Investment timing; Real options; Costly external financing; Cash holdings;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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