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Corporate Social Responsibility: An Economic and Financial Framework

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  • Geoffrey Heal

    () (Columbia Business School, 616 Uris Hall, 3022 Broadway, New York, NY 10027, U.S.A.)

Abstract

I analyze corporate social responsibility (CSR) from economic and financial perspectives, and suggest how it is reflected in financial markets. CSR is defined as a programme of actions to reduce externalized costs or to avoid distributional conflicts. It has evolved in response to market failures, a Coasian solution to problems associated with social costs. The analysis suggests that there is a resource-allocation role for CSR programmes in cases of market failure through private–social cost differentials, and also where distributional disagreements are strong. In some sectors of the economy private and social costs are roughly in line and distributional debates are unusual: here CSR has little role to play. Such sectors are outnumbered by those where CSR can play a valuable role in ensuring that the invisible hand acts, as intended, to produce the social good. It can also act to improve corporate profits and guard against reputational risks. The Geneva Papers (2005) 30, 387–409. doi:10.1057/palgrave.gpp.2510037

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Issues and Practice.

Volume (Year): 30 (2005)
Issue (Month): 3 (July)
Pages: 387-409

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Handle: RePEc:pal:gpprii:v:30:y:2005:i:3:p:387-409

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Cited by:
  1. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2008. "The price of ethics and stakeholder governance: The performance of socially responsible mutual funds," Journal of Corporate Finance, Elsevier, vol. 14(3), pages 302-322, June.
  2. P. L. Sacco & M. Viviani, 2006. "La responsabilita' sociale d'Impresa - prospettive teoriche nel dibattito italiano," Working Papers 578, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Hediger, Werner, 2008. "Agriculture’s Multifunctionality, Sustainability, and Social Responsibility," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36854, Agricultural Economics Society.
  4. Ziegler, Andreas & Busch, Timo & Hoffmann, Volker H., 2011. "Disclosed corporate responses to climate change and stock performance: An international empirical analysis," Energy Economics, Elsevier, vol. 33(6), pages 1283-1294.
  5. Andreas Ziegler, 2009. "Is it Beneficial to be Included in a Sustainability Stock Index? A Panel Data Study for European Firms," CER-ETH Economics working paper series 09/121, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  6. Bert Scholtens, 2009. "Corporate Social Responsibility in the International Banking Industry," Journal of Business Ethics, Springer, vol. 86(2), pages 159-175, May.
  7. Matthew J. Kotchen & Jon Jungbien Moon, 2011. "Corporate Social Responsibility for Irresponsibility," NBER Working Papers 17254, National Bureau of Economic Research, Inc.
  8. Rodrigues, João & Domingos, Tiago, 2008. "Consumer and producer environmental responsibility: Comparing two approaches," Ecological Economics, Elsevier, vol. 66(2-3), pages 533-546, June.
  9. Scholtens, Bert & Dam, Lammertjan, 2007. "Banking on the Equator. Are Banks that Adopted the Equator Principles Different from Non-Adopters?," World Development, Elsevier, vol. 35(8), pages 1307-1328, August.
  10. Shihe Fu & Liwei Shan, 2009. "Corporate Equality and Equity Prices: Doing Well While Doing Good?," EERI Research Paper Series EERI_RP_2009_09, Economics and Econometrics Research Institute (EERI), Brussels.
  11. Y. Hossein Farzin & Ken-Ichi Akao, 2006. "Environmental Quality in a Differentiated Duopoly," Working Papers 2006.138, Fondazione Eni Enrico Mattei.
  12. Supriti Mishra & Damodar Suar, 2010. "Does Corporate Social Responsibility Influence Firm Performance of Indian Companies?," Journal of Business Ethics, Springer, vol. 95(4), pages 571-601, September.
  13. Daubanes, Julien, 2009. "Changement climatique, instruments économiques et propositions pour un accord post-Kyoto: une synthèse," TSE Working Papers 09-006, Toulouse School of Economics (TSE).
  14. Hediger, Werner, 2010. "Welfare and capital-theoretic foundations of corporate social responsibility and corporate sustainability," The Journal of Socio-Economics, Elsevier, vol. 39(4), pages 518-526, August.
  15. Brekke, Kjell Arne & Nyborg, Karine, 2008. "Attracting responsible employees: Green production as labor market screening," Resource and Energy Economics, Elsevier, vol. 30(4), pages 509-526, December.
  16. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2008. "Socially responsible investments: Institutional aspects, performance, and investor behavior," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1723-1742, September.
  17. Semenova, Natalia & Hassel, Lars & Nilsson, Henrik, 2009. "The Value Relevance of Environmental and Social Performance: Evidence from Swedish SIX 300 Companies," Sustainable Investment and Corporate Governance Working Papers 2009/4, Sustainable Investment Research Platform.
  18. Bert Scholtens & Lammertjan Dam, 2007. "Cultural Values and International Differences in Business Ethics," Journal of Business Ethics, Springer, vol. 75(3), pages 273-284, October.
  19. Lundgren, Tommy, 2007. "On the Economics of Corporate Responsibility," Sustainable Investment and Corporate Governance Working Papers 2007/3, Sustainable Investment Research Platform.
  20. Drosdowski, Thomas, 2006. "On the Link Between Democracy and Environment," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-355, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  21. Urs von Arx & Andreas Ziegler, 2008. "The Effect of CSR on Stock Performance: New Evidence for the USA and Europe," CER-ETH Economics working paper series 08/85, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  22. Ana S. Branca & Joaquim P. Pina & Margarida Catalão-Lopes, 2012. "Corporate Giving, Competition and the Economic Cycle," Working Papers 2012/15, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..
  23. Callado-Muñoz, Francisco J & Utrero-González, Natalia, 2006. "Does it pay to be socially responsible? Evidence from Spanish retail banking sector," Working Papers of the Department of Economics, University of Girona 16, Department of Economics, University of Girona.

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