Timing corporate social responsibility investments: A dynamic investment model and empirical evidence

We study the optimal timing of corporate social responsibility (CSR) investments, providing model-theoretical rationale as well as empirical evidence. Using a dynamic investment model under costly external financing, we can relate a production economic perspective to CSR investments. The approach allows us to investigate energy efficiency of production and, hence, the corresponding CSR measures. Our model suggests that external financing costs can delay investment, increasing production but reducing its energy efficiency for a given level of productivity increase. Using a unique dataset of CSR reporting supplemented by corporate governance and financial data, we calculate the maximum likelihood estimates of the hazard of investing in CSR projects. Empirical findings suggest that factors such as productivity, geographical diversification, market risks, investment and financing costs, ownership concentration, and technological risks significantly influence investment timing.