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Does corporate social responsibility help mitigate firm-level climate change risk?

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  • Hossain, Ashrafee T.
  • Masum, Abdullah-Al

Abstract

The utility of corporate social responsibility (CSR), particularly during crisis times, has been a puzzle in the literature while climate change issues increasingly threaten corporate sustainability. Using a large sample of US firm-year observations from 2002 to 2018, we explore whether CSR provides corporate resilience against firm-level climate change risk (CCR) and find that CSR helps mitigate CCR substantially. Our regression model utilizes the firm fixed effect, and the outcome survives a battery of econometric validation tests, including a difference-in-difference test, Oster (2019), propensity score matching, entropy balancing, system GMM, and changed regression. Moreover, in the cross-sectional analyses, we find that CSR is more helpful in reducing CCR for firms with higher environmental, social, and governance (ESG) disclosure and those located in Republican-leaning states. Overall, our findings align with CSR's value-enhancing view that establishes CSR as a buffer against CCR from the strategic and policy-making perspectives.

Suggested Citation

  • Hossain, Ashrafee T. & Masum, Abdullah-Al, 2022. "Does corporate social responsibility help mitigate firm-level climate change risk?," Finance Research Letters, Elsevier, vol. 47(PB).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322001039
    DOI: 10.1016/j.frl.2022.102791
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    More about this item

    Keywords

    Corporate social responsibility; Climate change risk; Value-enhancing; Mitigation;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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