Stakeholders and corporate social responsibility: What makes firms tip over to CSR investments?

Abstract

AbstractDespite the growing role of corporate social responsibility (CSR) and the associated environmental, social and governance (ESG) factors, even corporations within the same industry take a vastly different approach in how they manage CSR. What makes corporations adopt more ESG‐aligned investments? What role do stakeholders play? This paper studies the role of government policy and consumer activism in CSR investments. The model shows the complementary nature between different stakeholders and between different government policy tools in inducing CSR investments. Economic uncertainty can amplify or dampen the effect of government policy and consumer activism. I derive testable implications of the model.