Regulatory uncertainty and corporate social responsibility

Abstract

Drawing upon the notion that the legal environment provides the conceptual and practical space in which corporate actions are deemed to be responsible (or not), we examine the effect of regulatory uncertainty on Corporate Social Responsibility (CSR) engagements. Using a sample of US firms, we find that when the legal and regulatory environment is uncertain, firms decrease overall CSR activities, as well as activities related to environmental performance and social performance. We introduce and develop the importance of the legal framework in which CSR is activated and demonstrate how its non-static nature impacts how such CSR engagements are carried out.