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The Value of Corporate Citizenship: Protection

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  • Dylan Minor

    (Harvard Business School, Strategy Unit)

Abstract

We explore the notion that corporate citizenship, as obtained through Corporate Social Responsibility (CSR), is used by managers to protect firm value, helping their firm better withstand negative business shocks. We formally explore two parallel mechanisms for such protection .one of building moral capital (CSR Contributions) and another of improving investor posteriors (CSR Investments). We find some theoretical and empirical support for both of these, but in different settings. In particular, we find that firms with higher CSR Investments enjoy an average of $1 billion of saved firm value upon an adverse event. In contrast, CSR Contribution firms lose value (on average) upon an event, possibly due to disingenuous contributions. Meanwhile, due to managerial moral hazard, firms with high levels of CSR Contributions face adverse events more often, whereas those with high levels of CSR Investments face them less often.

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  • Dylan Minor, 2015. "The Value of Corporate Citizenship: Protection," Harvard Business School Working Papers 16-021, Harvard Business School.
    • Handle: RePEc:hbs:wpaper:16-021
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    Cited by:

    1. Robert Faff & Jianning Huang & Pei Shao & Yuchao Xiao & Fuzhao Zhou, 2024. "Does Social Capital Enhance Stock Liquidity? An Investigation of the Resilience of the Trading Environment During a Crisis of Trust," Abacus, Accounting Foundation, University of Sydney, vol. 60(3), pages 627-664, September.
    2. Andreas Nilsson & David T. Robinson, 2018. "What Is the Business of Business?," Innovation Policy and the Economy, University of Chicago Press, vol. 18(1), pages 79-106.
    3. Karl V. Lins & Henri Servaes & Ane Tamayo, 2017. "Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis," Journal of Finance, American Finance Association, vol. 72(4), pages 1785-1824, August.
    4. Jean-Etienne de Bettignies & David T. Robinson, 2018. "When Is Social Responsibility Socially Desirable?," Journal of Labor Economics, University of Chicago Press, vol. 36(4), pages 1023-1072.
    5. Azimli, Asil, 2023. "The impact of climate policy uncertainty on firm value: Does corporate social responsibility engagement matter?," Finance Research Letters, Elsevier, vol. 51(C).
    6. John D’Arcy & Idris Adjerid & Corey M. Angst & Ante Glavas, 2020. "Too Good to Be True: Firm Social Performance and the Risk of Data Breach," Information Systems Research, INFORMS, vol. 31(4), pages 1200-1223, December.
    7. Hohlwegler, Olivia, 2021. "The Value of CSR in Times of Increased Policy Uncertainty: Evidence from the Brexit Referendum," Junior Management Science (JUMS), Junior Management Science e. V., vol. 6(1), pages 1-24.

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    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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