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Corporate social responsibility, stock prices, and tax policy

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  • Amir Barnea
  • Robert Heinkel
  • Alan Kraus

Abstract

We model a market in which some investors get utility from owning shares of firms that engage in corporate social responsibility (CSR). In equilibrium, investors' CSR considerations influence portfolio choices, stock prices, and CSR spending. We study tax policy designed to maximize total giving (individual and corporate) net of government tax breaks and find that its effectiveness is nonmonotonic in the proportion of altruistic investors: with few or many altruistic investors, it has little impact on giving, but, at intermediate levels, effective tax policy intuitively relates the corporate tax rebate rate on giving and the cap on allowable tax savings.

Suggested Citation

  • Amir Barnea & Robert Heinkel & Alan Kraus, 2013. "Corporate social responsibility, stock prices, and tax policy," Canadian Journal of Economics, Canadian Economics Association, vol. 46(3), pages 1066-1084, August.
    • Handle: RePEc:cje:issued:v:46:y:2013:i:3:p:1066-1084
    DOI: 10.1111/caje.12045
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    Cited by:

    1. Bakare, Bukola & Motuba, Diomo & Szmerekovsky, Joseph, 2022. "Do corporate social responsibility ratings have any effect on traffic congestion?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 165(C), pages 98-119.
    2. Cohen, Jeffrey R. & Gaynor, Lisa Milici & Krishnamoorthy, Ganesh & Wright, Arnold M., 2022. "The effects of audit committee ties and industry expertise on investor judgments—Extending Source Credibility Theory," Accounting, Organizations and Society, Elsevier, vol. 102(C).
    3. Jingwen Dai & Chao Lu & Yang Yang & Yanhong Zheng, 2018. "Is the Social Responsibility Information Disclosed by the Companies really Valuable?—Evidence from Chinese Stock Price Synchronicity," Sustainability, MDPI, vol. 10(10), pages 1-22, October.
    4. Christian Gollier & Sébastien Pouget, 2022. "Investment Strategies and Corporate Behaviour with Socially Responsible Investors: A Theory of Active Ownership," Economica, London School of Economics and Political Science, vol. 89(356), pages 997-1023, October.
    5. Hart, Oliver & Zingales, Luigi, 2017. "Companies Should Maximize Shareholder Welfare Not Market Value," Journal of Law, Finance, and Accounting, now publishers, vol. 2(2), pages 247-275, November.
    6. Murphy Ryan H., 2020. "Corporations as the Outgroup?," Man and the Economy, De Gruyter, vol. 7(1), pages 1-8, June.
    7. Jingwen Dai & Chao Lu & Jipeng Qi, 2019. "Corporate Social Responsibility Disclosure and Stock Price Crash Risk: Evidence from China," Sustainability, MDPI, vol. 11(2), pages 1-20, January.
    8. Chao Lu & Xuetong Zhao & Jingwen Dai, 2018. "Corporate Social Responsibility and Insider Trading: Evidence from China," Sustainability, MDPI, vol. 10(9), pages 1-17, September.

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