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Does Firm Political Risk Affect the Relationship between Corporate Social Responsibility and Firm Value?

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  • Ahmed Marhfor

    (Management Science Department, Université du Québec en Abitibi-Témiscamingue, Rouyn-Noranda, QC J9X 5E4, Canada
    African Chair of Innovation and Sustainable Management (CAIMD-UM6P), Mohammed VI Polytechnic University, Ben Guerir 43150, Morocco)

  • Kais Bouslah

    (African Chair of Innovation and Sustainable Management (CAIMD-UM6P), Mohammed VI Polytechnic University, Ben Guerir 43150, Morocco
    Centre for Responsible Banking and Finance, School of Management, University of St Andrews, North Haugh KY16 9RJ, UK)

  • Abdelmajid Hmaittane

    (African Chair of Innovation and Sustainable Management (CAIMD-UM6P), Mohammed VI Polytechnic University, Ben Guerir 43150, Morocco
    National School of Trade & Management (ENCG), Ibn Zohr University, Agadir 80000, Morocco)

Abstract

This paper investigates whether firm-level (idiosyncratic) political risk (PR) affects the relationship between corporate social responsibility (CSR) and firm value using a sample of 16,518 firm-year observations which correspond to 2055 unique firms belonging to the Russell 3000 Index over the sample period 2010–2020. Our main findings are as follows: First, firm-level PR does not affect firm value. Second, CSR is positively related to firm value, which is mainly driven by the social component of CSR. Finally, PR has no effect on the CSR–firm value relationship, regardless of the PR type. Our evidence suggests that firm-level PR is not priced in the financial market and as such it does not affect the CSR–firm value relationship. This is consistent with portfolio theory which suggests that only systematic risk is priced.

Suggested Citation

  • Ahmed Marhfor & Kais Bouslah & Abdelmajid Hmaittane, 2022. "Does Firm Political Risk Affect the Relationship between Corporate Social Responsibility and Firm Value?," Sustainability, MDPI, vol. 14(18), pages 1-23, September.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:18:p:11217-:d:909175
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