Corporate Social Responsibility and Firm Value: Recent Developments

Abstract

Abstract We provide a synthesized introduction to recent indings in the link between corporate social responsibility and irm value. The focus is on how and why proit-maximizing irms engage in socially responsible actions, and how such activities can increase prod- uct demand and shareholder value. Recent studies in empirical evidences, theoretical models, and trends in practice are discussed. This chapter is not intended to be a com- prehensive survey but rather an introduction to bring future research interest in this ield. Empirical studies show evidences of a positive impact of corporate giving on indi- cators of irm value such as shareholder value and inancial performance. Theoretical models provide mechanisms and economic foundations for the demand increase leading to proits in diferent market structures. Socially responsible actions can be induced by external activists for fear of boycots. Investors may prefer to hold shares of responsible irms when corporate giving can substitute for personal giving. A public good may be produced jointly with a private good. Models of general industry equilibrium ind that demand increases due to the public good may come from the endogenous market efect. Companies in industries with entry barriers make the top list of corporate giving. Using examples in the pharmaceutical, inance, and high-tech industries, we discuss how cor- porate social responsibility is conducted in practice. Keywords: corporate social responsibility, public good, irm value