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Does Firm Political Risk Affect the Relationship between Corporate Social Responsibility and Firm Value?

Name: Does Firm Political Risk Affect the Relationship between Corporate Social Responsibility and Firm Value?
Keywords: HG Finance, 330, JA, TJ807-830, firm-level political risk; corporate social responsibility; firm value; systematic political risk, TD194-195, 332, HG, Firm value, Renewable energy sources

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 07 Sep 2022 United Kingdom Publisher:MDPI AGJournal:Sustainability, volume 14, page 11,217 (eissn: 2071-1050,

Authors: Ahmed Marhfor; Kais Bouslah; Abdelmajid Hmaittane;

doi: 10.3390/su141811217

handle: 10023/25965

Does Firm Political Risk Affect the Relationship between Corporate Social Responsibility and Firm Value?

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Abstract

This paper investigates whether firm-level (idiosyncratic) political risk (PR) affects the relationship between corporate social responsibility (CSR) and firm value using a sample of 16,518 firm-year observations which correspond to 2055 unique firms belonging to the Russell 3000 Index over the sample period 2010–2020. Our main findings are as follows: First, firm-level PR does not affect firm value. Second, CSR is positively related to firm value, which is mainly driven by the social component of CSR. Finally, PR has no effect on the CSR–firm value relationship, regardless of the PR type. Our evidence suggests that firm-level PR is not priced in the financial market and as such it does not affect the CSR–firm value relationship. This is consistent with portfolio theory which suggests that only systematic risk is priced.

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United Kingdom

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Keywords

HG Finance, 330, JA, TJ807-830, firm-level political risk; corporate social responsibility; firm value; systematic political risk, TD194-195, 332, HG, Firm value, Renewable energy sources, systematic political risk, Systematic political risk, Firm-level political risk, GE1-350, Corporate and social responsibility, corporate social responsibility, Environmental effects of industries and plants, 3rd-DAS, JA Political science (General), Environmental sciences, SDG 12 - Responsible Consumption and Production, firm value, firm-level political risk

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