The Effect of Corporate Social Responsibility on Enterprise Risk Management

Chen, Tsai-Jyh; Chang, Nina

doi:10.5465/ambpp.2012.15386abstract

Cited by 3 publications

(5 citation statements)

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“…In other words, commitment to CSR is indeed found to provide firms with protection against systemic risks (US-China trade war). This result provides support for our Hypothesis 4 and is also consistent with the findings of Chen et al (2015), that participation in CSR has a risk management effect on stock prices and a long-term dampening effect on stock volatility; that is to say, "good will be rewarded with good". This finding is also consistent with the empirical results reported by Kao et al (2016), in which it was noted that firms fulfilling their CSR activities had a significantly negative correlation with total risk, thereby providing support for the 'risk reduction' hypothesis.…”

Section: Csr and Us-china Trade Warsupporting

confidence: 89%

“…Their empirical results and the insurance-like effect of CSR on firm value (Godfrey, 2005) suggested that participation in CSR could be utilized as an effective risk management tool. Chen et al (2015) demonstrated that participation in CSR activities had a risk management effect on stock prices, which they found to be even more profound for safety events, with this phenomenon having a long-term effect on minimizing stock volatility. Committing to CSR helps to reduce any unfavorable evaluation when negative events are reported, and can also minimize the level of punishment; the so called "good will be rewarded with good" argument.…”

Section: Literature Review Empirical Review and Hypothesis Developmentmentioning

confidence: 99%

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Does corporate social responsibility provide protection against systemic risks? Evidence from Taiwan during the US-China trade war

Chen

Yang

2023

IJRBS

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This paper examines the protection against systemic risks of the financial and stock performance of firms in receipt of ‘corporate social responsibility’ (CSR) awards. The data we obtained from the Taiwan Economic Journal (TEJ) in 2016-2018, comprised of CSR-award-recipient firms (CSR firms) voted for by the Common Wealth and Global Views magazines, for a sample period running from the third quarter of 2017 to the third quarter of 2018. Our empirical results reveal that in terms of their financial performance, as compared to non-CSR-award-recipient (non-CSR) firms, CSR firms failed to demonstrate any better protection against systemic risks (such as the US-China trade war). However, the stock performance of CSR firms clearly provided better protection than that of non-CSR firms; the reason for this observation is assumed to be the higher operational costs faced by CSR firms seeking to continue to pursue their CSR goals when encountering systemic risks. Nevertheless, participation in CSR is found to have an insurance-like effect on firm value, which clearly helps to increase the confidence of investors and reduce stock volatility

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Section: Csr and Us-china Trade Warsupporting

confidence: 89%

Section: Literature Review Empirical Review and Hypothesis Developmentmentioning

confidence: 99%

Does corporate social responsibility provide protection against systemic risks? Evidence from Taiwan during the US-China trade war

Chen

Yang

2023

IJRBS

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“…Previous studies have analyzed the link between CSR and financial performance, establishing a significant positive relationship between the two variables (Cupriak et al, 2020;Deng et al, 2013;Krüger, 2015;Servaes & Tamayo, 2013). However, the extent to which CSR affects a company's financial risk has not been studied sufficiently, and a direct and automatic relationship between ESG measures and risk has not been clearly established (Becchetti et al, 2016;Bosch-Badia et al, 2018;Chen et al, 2015;Orlitzky & Bejamin, 2001;Schaeffer et al, 2012). Hence the timeliness of this article.…”

Section: Introductionmentioning

confidence: 92%

“…In short, sustainable companies are less volatile, so investing in them is an effective risk management strategy for investors (Sabbaghi, 2011), valued by financial markets (Feldman et al, 1997). Moreover, the influence of sustainability measures on company risk is felt more both in times of uncertainty (Lackmann et al, 2012;Ouyang et al, 2017) and in the long-term (Bosch-Badia et al, 2018;Chen et al, 2015).…”

Section: Literature Review and Theoretical Frameworkmentioning

confidence: 99%

Should risk-averse investors target the portfolios of socially responsible companies?

Martínez

Román

Martín-Cervantes

2022

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Research background: Companies are required to implement Corporate Social Responsibility (CSR) policies to mitigate the adverse social and environmental effects of their activities and gain legitimacy in the eyes of society. Sustainability initiatives are costly for companies but, at the same time, they are important value-creation drivers. Retail and institutional investors are increasingly choosing portfolios based on CSR performance. However, the relationship between CSR and market beta has hardly been studied at all in the literature, and no direct comparison of the U.S. and European markets has been conducted. Purpose of the article: The two fundamental variables that define an investment are return and risk, and the appropriate risk-return combination depends on the profile of the investors. This research aims to analyze the relationship between CSR and market risk, understood as price volatility and measured by market beta in the U.S. and European markets. Methods: Companies listed in the S&P 500 and Euro Stoxx 300 indexes from 2015 to 2019 were examined using OLS regressions with instrumental variables (IV) and fixed effects panel data. Findings & value added: The results show that those companies with higher CSR have betas below the market index in the U.S. market as well as lower volatility, and are, therefore, more appropriate choices for risk-averse investors. However, this relationship was not confirmed in the European market. This difference may be justified by two reasons: 1) The non-adherence of the United States to the Kyoto Protocol, resulting in less strict legal regulations than in Europe; 2) In the U.S. market, betas are more aggressive, while in the European market they are more defensive, with little margin for reduction. This research contributes to the current state of knowledge by providing empirical evidence that social, environmental, and corporate governance sustainability practices reduce stock volatility in the U.S. capital market, which is highly relevant for private and institutional investors who make their investments based on moral criteria. The results are current and reliable since they cover a broad and recent period for two of the most important stock market indexes.

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“…Indeed, some firms are thought to have blindly pursued CSR activities with the primary aim of meeting public expectations, with such a focus ultimately weakening the competitiveness of their own products and putting the firm at a disadvantage, in terms of its overall performance. Chen et al (2015) concluded that prior participation in CSR helped to increase the confidence of stockholders during periods when firms were faced with negative market news. In such cases, stockholders would be unlikely to sell their stocks, which would naturally provide the firm with an additional buffer against such risks.…”

Section: Introductionmentioning

confidence: 99%

The impact of corporate social responsibility on corporate performance in different industries evidence from Taiwan

Chen,

Chang,

Yang

2024

IJRBS

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The purpose of this study is to analyze whether there are differences in the impact of corporate social responsibility on its financial performance and stock performance in different industries. The research period is from 2016 to 2018. The samples are selected from the corporate social responsibility award-winning companies selected by Commonwealth Magazine and Vision Magazine, and the financial information comes from Taiwan Economic News (TEJ). The empirical results show that traditional heavy industries have been established for a long time and the equipment is relatively old, so it needs to pay a relatively high cost to improve. Therefore, in this type of industry, corporate social responsibility has a negative impact on its financial impact, and even if it is a reputation It has won the evaluation of the public, but its stock characteristics are not easy to fluctuate, so the impact on its stock performance is not significant. On the contrary, in the other two industries, corporate social responsibility will not burden its financial performance, but will positively help its stock performance. Among them, in the electronics industry, corporate social responsibility will positively help its financial performance. It may be that this type of industry has a relatively high bargaining power for products and relatively advanced technology, so it can transfer the cost of corporate responsibility invested to the selling price of the product.

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The Effect of Corporate Social Responsibility on Enterprise Risk Management

Cited by 3 publications

References 0 publications

Does corporate social responsibility provide protection against systemic risks? Evidence from Taiwan during the US-China trade war

Does corporate social responsibility provide protection against systemic risks? Evidence from Taiwan during the US-China trade war

Should risk-averse investors target the portfolios of socially responsible companies?

The impact of corporate social responsibility on corporate performance in different industries evidence from Taiwan

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