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The Impact of Corporate Social Performance on Financial Risk and Utility: A Longitudinal Analysis

Author

Listed:
  • Ioannis Oikonomou

    (ICMA Centre, Henley Business School, University of Reading)

  • Chris Brooks

    (ICMA Centre, Henley Business School, University of Reading)

  • Stephen Pavelin
Abstract
This study focuses on the wealth-protective effects of socially responsible firm behaviour by examining the association between corporate social performance (CSP) and financial risk for an extensive panel data sample of S&P 500 companies between the years 1992 and 2009. In addition, the link between CSP and investor utility is investigated. The main findings are that corporate social responsibility is negatively but weakly related to systematic firm risk and that corporate social irresponsibility is positively and strongly related to financial risk. The fact that both conventional and downside risk measures lead to the same conclusions adds convergent validity to the analysis. However, the risk-return trade-off appears to be such that no clear utility gain or loss can be realized by investing in firms characterized by different levels of social and environmental performance. Overall volatility conditions of the financial markets are shown to play a moderating role in the nature and strength of the CSP-risk relationship.

Suggested Citation

  • Ioannis Oikonomou & Chris Brooks & Stephen Pavelin, 2010. "The Impact of Corporate Social Performance on Financial Risk and Utility: A Longitudinal Analysis," ICMA Centre Discussion Papers in Finance icma-dp2010-12, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:icmadp:icma-dp2010-12
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    File URL: http://www.icmacentre.ac.uk/files/discussion-papers/dp2010_12.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate Social Responsibility; CSR; CSP; Financial Risk; Utility Measures; Panel Data; S&P 500.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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