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Social Performance and Firm Risk: Impact of the Financial Crisis

Author

Listed:
  • Kais Bouslah

    (University of St Andrews)

  • Lawrence Kryzanowski

    (Concordia University)

  • Bouchra M’Zali

    (Université du Québec à Montréal)

Abstract

This paper examines the impact of the recent financial crisis (2008–2009) on the relation between a firm’s risk and social performance (SP) using a sample of non-financial U.S. firms covering the period 1991–2012. We find that the relation between SP and risk is significantly different in the crisis period (post-crisis period) compared to the pre-crisis period. SP reduces volatility during the financial crisis. The risk reduction potential of SP is mainly due to the strengths component of SP. Since the relation of risk is stronger with SP strengths than SP concerns, this implies an asymmetric relation between these SP components and a firm’s risk. Specifically, strengths act as a risk reduction tool during an adverse economic environment.

Suggested Citation

  • Kais Bouslah & Lawrence Kryzanowski & Bouchra M’Zali, 2018. "Social Performance and Firm Risk: Impact of the Financial Crisis," Journal of Business Ethics, Springer, vol. 149(3), pages 643-669, May.
    • Handle: RePEc:kap:jbuset:v:149:y:2018:i:3:d:10.1007_s10551-016-3017-x
    DOI: 10.1007/s10551-016-3017-x
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    More about this item

    Keywords

    Financial crisis; Volatility; Idiosyncratic risk; Social performance; Strengths; Concerns;
    All these keywords.

    JEL classification:

    • 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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