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The role of options markets in corporate social responsibility

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  • Li, Fengfei
  • Lin, Chen
  • Lin, Tse-Chun
  • Shen, Sichen

Abstract

We explore the relationship between options trading and corporate social responsibility (CSR). We find that options trading can enhance CSR by (i) fostering shareholder activism, as indicated by increased long-term and socially responsible institutional ownership and CSR proposals and (ii) intensifying product market competition, which spurs green innovation and product-related CSR initiatives. The positive effects are more pronounced in well-governed firms but diminished in firms with managerial entrenchment. Moreover, CSR improvements driven by options trading positively influence firm value, with notable enhancements in environmental performance. Our results underscore that options markets play a crucial role in promoting responsible corporate practices.

Suggested Citation

  • Li, Fengfei & Lin, Chen & Lin, Tse-Chun & Shen, Sichen, 2024. "The role of options markets in corporate social responsibility," Journal of Financial Markets, Elsevier, vol. 70(C).
  • Handle: RePEc:eee:finmar:v:70:y:2024:i:c:s1386418124000284
    DOI: 10.1016/j.finmar.2024.100910
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    More about this item

    Keywords

    Corporate social responsibility; CSR; Options trading; Shareholder activism; Corporate governance; Environmental performance; CSR investment;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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