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Corporate social responsibility, stock prices, and tax policy

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  • Amir Barnea
  • Robert Heinkel
  • Alan Kraus

Abstract

We model a market in which some investors get utility from owning shares of firms that engage in corporate social responsibility (CSR). In equilibrium, investors' CSR considerations influence portfolio choices, stock prices, and CSR spending. We study tax policy designed to maximize total giving (individual and corporate) net of government tax breaks and find that its effectiveness is non‐monotonic in the proportion of altruistic investors: with few or many altruistic investors, it has little impact on giving, but, at intermediate levels, effective tax policy intuitively relates the corporate tax rebate rate on giving and the cap on allowable tax savings. Responsabilité sociale des sociétés, prix des actions et politique fiscale. On présente un modèle dans lequel certains investisseurs ont une préférence pour la possession d'actions d'entreprises qui acceptent une responsabilité sociale. En équilibre, l'intérêt des investisseurs pour la responsabilité sociale influence les choix de portefeuilles, le prix des actions, et les dépenses au chapitre de la responsabilité sociale. On étudie la politique fiscale cherchant à maximiser les dons totaux (individuels et corporatifs) en sus des déductions fiscales permises par les gouvernements, et on découvre que son impact n'est pas monotone par rapport à la proportion des investisseurs altruistes : quand il y a peu ou beaucoup d'investisseurs altruistes, cette politique a peu d'impact sur les dons; aux niveaux intermédiaires, une politique fiscale effective relie les taux de déductions fiscales permises sur les dons et le maximum permis d'épargnes fiscales intuitivement.

Suggested Citation

  • Amir Barnea & Robert Heinkel & Alan Kraus, 2013. "Corporate social responsibility, stock prices, and tax policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(3), pages 1066-1084, August.
    • Handle: RePEc:wly:canjec:v:46:y:2013:i:3:p:1066-1084
    DOI: 10.1111/caje.12045
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    References listed on IDEAS

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    1. Christian Gollier & Sébastien Pouget, 2022. "Investment Strategies and Corporate Behaviour with Socially Responsible Investors: A Theory of Active Ownership," Economica, London School of Economics and Political Science, vol. 89(356), pages 997-1023, October.
    2. Bakare, Bukola & Motuba, Diomo & Szmerekovsky, Joseph, 2022. "Do corporate social responsibility ratings have any effect on traffic congestion?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 165(C), pages 98-119.
    3. Cohen, Jeffrey R. & Gaynor, Lisa Milici & Krishnamoorthy, Ganesh & Wright, Arnold M., 2022. "The effects of audit committee ties and industry expertise on investor judgments—Extending Source Credibility Theory," Accounting, Organizations and Society, Elsevier, vol. 102(C).
    4. Jingwen Dai & Chao Lu & Yang Yang & Yanhong Zheng, 2018. "Is the Social Responsibility Information Disclosed by the Companies really Valuable?—Evidence from Chinese Stock Price Synchronicity," Sustainability, MDPI, vol. 10(10), pages 1-22, October.
    5. Murphy Ryan H., 2020. "Corporations as the Outgroup?," Man and the Economy, De Gruyter, vol. 7(1), pages 1-8, June.
    6. Chao Lu & Xuetong Zhao & Jingwen Dai, 2018. "Corporate Social Responsibility and Insider Trading: Evidence from China," Sustainability, MDPI, vol. 10(9), pages 1-17, September.
    7. Jingwen Dai & Chao Lu & Jipeng Qi, 2019. "Corporate Social Responsibility Disclosure and Stock Price Crash Risk: Evidence from China," Sustainability, MDPI, vol. 11(2), pages 1-20, January.

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