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Corporate social responsibility and firm-level systematic risk: The moderating effect of economic policy uncertainty

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  • Wang, Zhixiao
  • Kong, Dongmin
  • Liu, Shasha

Abstract

This paper investigates the relationship between corporate social responsibility (CSR) performance, firm-level systematic risk, and variations in economic policy uncertainty (EPU) levels. We examine a dataset of Chinese listed firms, finding that higher CSR performance should reduce firms' systematic risk during periods with relatively high levels of EPU. Furthermore, better satisfaction of primary and secondary stakeholders can help firms reduce systematic risk and increase performance when EPU is high. This evidence supports the implication of stakeholder theory that CSR investment can create substantial relational wealth essential to firms' risk management. Our results also imply that the CSR-systematic risk relationship can be positive when EPU is relatively low. Our findings indicate that the risk-mitigation benefits of CSR are state-contingent and can be better realized during downturns.

Suggested Citation

  • Wang, Zhixiao & Kong, Dongmin & Liu, Shasha, 2024. "Corporate social responsibility and firm-level systematic risk: The moderating effect of economic policy uncertainty," International Review of Financial Analysis, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:finana:v:94:y:2024:i:c:s1057521924001583
    DOI: 10.1016/j.irfa.2024.103226
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    More about this item

    Keywords

    Corporate social responsibility; Economics policy uncertainty; Systematic risk; Stakeholder relationship; Risk management;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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