Enhancer or stabilizer? Investigating the distinct impact of primary and secondary CSR on the level and variability of firm value

Prior research in CSR concentrates on its impact on the level of firm value, without considering the risk associated with such effect (i.e., reliability). Understanding the reliability of such an impact is important as it unpacks the risky nature of CSR investment. By classifying CSR activities as competitive-advantage-seeking and legitimacy-seeking, we develop a theoretical framework that provides a holistic understanding of CSR’s impact on firm value in terms of simultaneous implications for both level and reliability. Our results suggest that high performance in primary-stakeholder-oriented CSR increases firm value, but simultaneously increases the variability of the resulting value distribution. In contrast, secondary-stakeholder-oriented CSR does not significantly increase firm value but does reduce the variability of the resulting value distribution. That is, primary-stakeholder-oriented CSR activities demonstrate a “risky investment” property and function as a risky value enhancer, while secondary-stakeholder-oriented CSR activities demonstrate a “risk reduction” property and function as a value stabilizer.