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Corporate Social Responsibility for Irresponsibility

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  • Matthew J. Kotchen
  • Jon Jungbien Moon

Abstract

This paper provides an empirical investigation of the hypothesis that companies engage in corporate social responsibility (CSR) in order to offset corporate social irresponsibility (CSI). We find general support for the causal relationship: when companies do more “harm,” they also do more “good.” The empirical analysis is based on an extensive 15-year panel dataset that covers nearly 3,000 publicly traded companies. In addition to the overall finding that more CSI results in more CSR, we find evidence of heterogeneity among industries, where the effect is stronger in industries where CSI tends to be the subject of greater public scrutiny. We also investigate the degree of substitutability between different categories of CSR and CSI. Within the categories of community relations, environment, and human rights—arguably among those dimensions of social responsibility that are most salient—there is a strong within-category relationship. In contrast, the within-category relationship for corporate governance is weak, but CSI related to corporate governance appears to increase CSR in most other categories. Thus, when CSI concerns arise about corporate governance, companies seemingly choose to offset with CSR in other dimensions, rather than reform governance itself.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17254.

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Date of creation: Jul 2011
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Publication status: published as Kotchen, M. and J. Moon, “Corporate Social Responsibility for Irresponsibility,” The B.E. Journal of Economic Analysis & Policy (Contributions), 12:1 (2012) Article 55 .
Handle: RePEc:nbr:nberwo:17254

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  1. Geoffrey Heal, 2005. "Corporate Social Responsibility: An Economic and Financial Framework," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 30(3), pages 387-409, July.
  2. Hong, Harrison & Kacperczyk, Marcin, 2009. "The price of sin: The effects of social norms on markets," Journal of Financial Economics, Elsevier, Elsevier, vol. 93(1), pages 15-36, July.
  3. Donald S. Siegel & Donald F. Vitaliano, 2007. "An Empirical Analysis of the Strategic Use of Corporate Social Responsibility," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 16(3), pages 773-792, 09.
  4. David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 10(1), pages 7-45, 03.
  5. David P. Baron, 2003. "Private Politics," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 12(1), pages 31-66, 03.
  6. Vanessa M Strike & Jijun Gao & Pratima Bansal, 2006. "Being good while being bad: social responsibility and the international diversification of US firms," Journal of International Business Studies, Palgrave Macmillan, vol. 37(6), pages 850-862, November.
  7. Aaron K. Chatterji & David I. Levine & Michael W. Toffel, 2009. "How Well Do Social Ratings Actually Measure Corporate Social Responsibility?," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 18(1), pages 125-169, 03.
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Cited by:
  1. Baron, David P. & Harjoto, Maretno A. & Jo, Hoje, 2009. "The Economics and Politics of Corporate Social Performance," Research Papers, Stanford University, Graduate School of Business 1993r, Stanford University, Graduate School of Business.
  2. Lint Barrage & Eric Chyn & Justine Hastings, 2014. "Advertising, Reputation, and Environmental Stewardship: Evidence from the BP Oil Spill," NBER Working Papers 19838, National Bureau of Economic Research, Inc.
  3. Di Giuli, Alberta & Kostovetsky, Leonard, 2014. "Are red or blue companies more likely to go green? Politics and corporate social responsibility," Journal of Financial Economics, Elsevier, Elsevier, vol. 111(1), pages 158-180.
  4. Armstrong, J. Scott & Green, Kesten C., 2013. "Effects of corporate social responsibility and irresponsibility policies," Journal of Business Research, Elsevier, Elsevier, vol. 66(10), pages 1922-1927.
  5. Kleemann, Linda & Krieger-Boden, Christiane, 2011. "Bridging morale and business through shared value?," Kiel Policy Brief 38, Kiel Institute for the World Economy (IfW).
  6. Baron, David P. & Harjoto, Maretno A. & Jo, Hoje, 2008. "The Economics and Politics of Corporate Social Performance," Research Papers, Stanford University, Graduate School of Business 1993, Stanford University, Graduate School of Business.

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