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.
Subject
Management, Monitoring, Policy and Law,Renewable Energy, Sustainability and the Environment,Geography, Planning and Development,Building and Construction
Reference76 articles.
1. Biden Signs Historic Climate Bill, Teeing Up Surge in US Clean Energy Spending;Hale,2022
2. The social responsibility of business is to increase its profits;Friedman;The New York Times Magazine,1970
3. Corporate Social Responsibility and Managerial Entrenchment
4. Managerial Entrenchment and Corporate Social Performance
5. Corporate Social Responsibility as a Conflict Between Shareholders