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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.

Suggested Citation

  • Matthew J. Kotchen & Jon Jungbien Moon, 2011. "Corporate Social Responsibility for Irresponsibility," NBER Working Papers 17254, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17254
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    References listed on IDEAS

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    Cited by:

    1. Yi Tang & Cuili Qian & Guoli Chen & Rui Shen, 2015. "How CEO hubris affects corporate social (ir)responsibility," Strategic Management Journal, Wiley Blackwell, vol. 36(9), pages 1338-1357, September.
    2. Andreas Hoepner & Lisa Schopohl, 2015. "Red versus Blue: Do Political Dimensions Influence the Investment Preferences of State Pension Funds?," ICMA Centre Discussion Papers in Finance icma-dp2015-06, Henley Business School, Reading University.
    3. Maretno Harjoto & Indrarini Laksmana & Robert Lee, 2015. "Board Diversity and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 132(4), pages 641-660, December.
    4. 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, vol. 111(1), pages 158-180.
    5. repec:eee:jbrese:v:80:y:2017:i:c:p:82-97 is not listed on IDEAS
    6. Lint Barrage & Eric Chyn & Justine Hastings, 2014. "Advertising as Insurance or Commitment? Evidence from the BP Oil Spill," NBER Working Papers 19838, National Bureau of Economic Research, Inc.
    7. Armstrong, J. Scott & Green, Kesten C., 2013. "Effects of corporate social responsibility and irresponsibility policies," Journal of Business Research, Elsevier, vol. 66(10), pages 1922-1927.
    8. Jayati Sarkar & Subrata Sarkar, 2015. "Corporate social responsibility in India - An Effort to bridge the welfare gap," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-023, Indira Gandhi Institute of Development Research, Mumbai, India.
    9. Cornett, Marcia Millon & Erhemjamts, Otgontsetseg & Tehranian, Hassan, 2016. "Greed or good deeds: An examination of the relation between corporate social responsibility and the financial performance of U.S. commercial banks around the financial crisis," Journal of Banking & Finance, Elsevier, vol. 70(C), pages 137-159.
    10. Fatemi, Ali & Fooladi, Iraj & Tehranian, Hassan, 2015. "Valuation effects of corporate social responsibility," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 182-192.
    11. Jamshed Raza & Abdul Majid, 2016. "Perceptions and practices of corporate social responsibility among SMEs in Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(6), pages 2625-2650, November.
    12. Dawn L. Keig & Lance Eliot Brouthers & Victor B. Marshall, 2015. "Formal and Informal Corruption Environments and Multinational Enterprise Social Irresponsibility," Journal of Management Studies, Wiley Blackwell, vol. 52(1), pages 89-116, January.
    13. Imbun, Benedict Y. & Duarte, Fernanda & Smith, Paul, 2015. "“You are not our only child”: Neoliberalism, food security issues and CSR discourse in the Kutubu oilfields of Papua New Guinea," Resources Policy, Elsevier, vol. 43(C), pages 40-49.
    14. Ben Gilbert & Alexander James & Jason Shogren, 2017. "Corporate Apology for Environmental Damage," Working Papers 2017-02, University of Alaska Anchorage, Department of Economics.
    15. repec:kap:jbuset:v:143:y:2017:i:4:d:10.1007_s10551-016-3072-3 is not listed on IDEAS
    16. Kleemann, Linda & Krieger-Boden, Christiane, 2011. "Bridging morale and business through shared value?," Open Access Publications from Kiel Institute for the World Economy 53147, Kiel Institute for the World Economy (IfW).
    17. Krüger, Philipp, 2015. "Corporate goodness and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 115(2), pages 304-329.
    18. Ashish Arora & Michelle Gittelman & Sarah Kaplan & John Lynch & Will Mitchell & Nicolaj Siggelkow & Robert J. Carroll & David M. Primo & Brian K. Richter, 2016. "Using item response theory to improve measurement in strategic management research: An application to corporate social responsibility," Strategic Management Journal, Wiley Blackwell, vol. 37(1), pages 66-85, January.
    19. Wang, Yanbing & Delgado, Michael & Xu, Jin, 2016. "Long-term financial incentive of environmental responsibility -- socially responsible investing and firm cost of capital," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235994, Agricultural and Applied Economics Association.
    20. Dylan Minor, 2015. "The Value of Corporate Citizenship: Protection," Harvard Business School Working Papers 16-021, Harvard Business School.
    21. repec:eee:touman:v:59:y:2017:i:c:p:610-620 is not listed on IDEAS
    22. Elasrag, Hussein, 2015. "Corporate Social Responsibility: An Islamic Perspective," MPRA Paper 67537, University Library of Munich, Germany.
    23. Baron, David P. & Harjoto, Maretno A. & Jo, Hoje, 2009. "The Economics and Politics of Corporate Social Performance," Research Papers 1993r, Stanford University, Graduate School of Business.
    24. Baron, David P. & Harjoto, Maretno A. & Jo, Hoje, 2008. "The Economics and Politics of Corporate Social Performance," Research Papers 1993, Stanford University, Graduate School of Business.

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    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General

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