Abstract
This paper investigates the impact of corporate social responsibility on the idiosyncratic risk of enterprises. We find that corporate social responsibility is negatively associated with the idiosyncratic risk of enterprises. This association is robust to a series of robustness checks, including the use of alternative indicators, exclusion of the effect of multicollinearity, and the addition of missing variables to address endogeneity concerns. Further analyses show that the impact of corporate social responsibility on idiosyncratic risk is more significant in state-owned enterprises, firms with poor corporate governance or low growth. Our findings support the notion that corporate social responsibility appears to improve corporate performance.
Highlights
Corporate social responsibility refers to that when an enterprise creates profits, it bears legal responsibility to shareholders and employees, as well as to consumers, community and environmental responsibility [1, 2, 3]
We find that the more enterprises overtake their corporate social responsibility, the less idiosyncratic risk they will have
The ones that higher than the median are regarded as group in High idiosyncratic risk (High IR ) and ones that lower than the median are grouped in low idiosyncratic risk
Summary
Corporate social responsibility (hereafter, CSR) refers to that when an enterprise creates profits, it bears legal responsibility to shareholders and employees, as well as to consumers, community and environmental responsibility [1, 2, 3]. Setting a good corporate image in this management can gain reputation and trust to realize the long-term goals [8] In this sense, enterprises fulfil their social responsibilities and help solve the employment problem. Gunness (1994) points out that the criticism that CSR reflects a belief that companies are directly responsible for solving the problems plaguing society, and that they can do so alone, is at best an unrealistic hope [20]. He argues that the term "corporate social responsibility" is vague. We innovatively integrate CSR as an influencing factor into the assessment of enterprise trait risk
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