Measuring the unmeasurable: CSR divergence and future stock price crash risk

Corporate social responsibility (CSR) is vital for sustainable growth, while some companies receive quite large variations in CSR assessments. Aiming to measure the unmeasurable social responsibility, this paper investigates the effects of corporate social responsibility (CSR) and its rating divergence on the future stock price crash risk. We use the divergence of CSR ratings as the outcome uncertainty, and find that conditional on firms’ CSR performance, future stock price crash risk will increase with the CSR divergence. Further results show that the moderating effect is more pronounced for firms with weaker investor protection or higher agency costs. We conclude that firms with higher CSR divergence have more severe agency problems, complementary to the CSR literature.