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Corporate Social Responsibility and Firm Value: The Moderating Effects of Financial Flexibility and R&D Investment

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  • Zhaoyang Guo

    (Marketing Department, School of Management, Xiamen University, Xiamen 361005, China)

  • Siyu Hou

    (Marketing Department, School of Management, Xiamen University, Xiamen 361005, China)

  • Qingchang Li

    (Marketing Department, School of Business Administration, Jimei University, 185 Yinjiang Road, Jimei District, Xiamen 361021, China)

Abstract

Despite the significance of corporate social responsibility (CSR), there remains an extensive debate regarding its implications for firm value. This study examines the moderating effects of financial flexibility and R&D investment on CSR and firm value. Using multiple archival data of 2311 companies from 2010 to 2016, our study finds that CSR is a “double-edged sword” for firm value; specifically, CSR significantly increases systematic risk but reduces firms’ idiosyncratic risk as well as the Tobin’s q. Besides, the results indicate that financial flexibility and R&D investment significantly reduce the negative correlation between CSR and Tobin’s q, the difference between the two being that financial flexibility can reduce the positive relationship between CSR and system risk, while R&D spending can reduce the negative relationship between CSR and idiosyncratic risk. By adding new aspects to the discussion about how CSR affects firm value, the results speak to both theorists and practitioners.

Suggested Citation

  • Zhaoyang Guo & Siyu Hou & Qingchang Li, 2020. "Corporate Social Responsibility and Firm Value: The Moderating Effects of Financial Flexibility and R&D Investment," Sustainability, MDPI, vol. 12(20), pages 1-17, October.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:20:p:8452-:d:427704
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    3. Gang Tian & Gabriel Dodzi Pekyi & Haojia Chen & Huaping Sun & Xiaoling Wang, 2021. "Sustainability-Conscious Stakeholders and CSR: Evidence from IJVs of Ghana," Sustainability, MDPI, vol. 13(2), pages 1-23, January.
    4. Bao-Guang Chang & Kun-Shan Wu, 2021. "The nonlinear relationship between financial flexibility and enterprise risk-taking during the COVID-19 pandemic in Taiwan’s semiconductor industry," Oeconomia Copernicana, Institute of Economic Research, vol. 12(2), pages 307-333, June.
    5. Meftah Gerged, Ali & Kuzey, Cemil & Uyar, Ali & Karaman, Abdullah S., 2023. "Does investment stimulate or inhibit CSR transparency? The moderating role of CSR committee, board monitoring and CEO duality," Journal of Business Research, Elsevier, vol. 159(C).

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