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The Department of Finance is proud to announce the upcoming seminar with Yrjo Koskinen, Boston University School of Management.

Yrjo will present:

Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence

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Authors:

Rui Albuquerque, Boston University Católica-Lisboa School of Business and��Economics, ECGI and CEPR��
Artyom Durnev, University of Iowa��
Yrjo Koskinen, Boston University and CEPR

Abstract:

This paper presents an industry equilibrium model where firms can choose to��engage in corporate social responsibility (CSR) activities. We model CSR��activities as an investment in customer loyalty and show that CSR decreases��systematic risk and increases firm value. These effects are stronger for firms��producing differentiated goods and when consumers' expenditure share on��CSR goods is small. We find supporting evidence for our predictions. In our��empirical tests, we address a potential endogeneity problem by instrumenting��CSR using data on the political affiliation of the firm's home state, and data on��environmental and engineering disasters and product recalls.