Valuations and Decisions of Investing in Corporate Social Responsibility: A Real Options Viewpoint

Abstract

Corporate social responsibility (CSR) implementation could raise corporate reputations and benefit long-term development. Studying the effects of CRS on corporate valuation is essential. However, studies on the valuation of CSR are limited, particularly studies involving a dynamic model for valuing CSR. This study applies a real options approach to derive the company valuation of CSR investments, CSR options value, and the optimal timing for implementing CSR. This study elucidates the value of CSR and the decision to invest in CSR. Specifically, the value of CSR options facilitates determining whether to invest in CSR, and the optimal threshold for implementing CSR indicates explicitly when to invest in CSR. In addition, numerical analyses and results are demonstrated to verify the established model. This is the first and novel attempt to consider the valuation model and optimal strategies of CSR investments using the methods of real options.to approve of environment-related CSR activities taken by businesses. Previous studies on the correlation between CSR and corporations' financial performance have mainly investigated whether corporate investment on CSR can enhance or create corporate value and effectively improve corporate performance. CSR implementation could increase brand awareness and corporate reputation, thus benefiting long-term corporate development. Nevertheless, CSR expenditures cannot be ignored. The relationship between CSR and corporate performance has been widely investigated. Studies including those of McWilliams and Siegel [4] and Krüger [5] consider that the results of CSR investments are inconsistent. This inconsistency shows that the performance of CSR investments is complicated and uncertain. Although implementing CSR has a positive impact and is a current trend, CSR investors could suffer a great loss. A real options approach is suitable to value the uncertainty of CSR investments. Especially, the optimal timing to invest in CSR can be derived from the real options approach, and that can help the firms to make the best decisions relating to CSR. A real options approach is therefore a great method when facing the problem of uncertainty.Scholars have widely adopted real options theory to evaluate investment projects in recent years because flexibility in investment decision-making is valuable under market uncertainties [6]. However, only a few studies use the real options viewpoint to analyze CSR investments [7-10]. These researchers use the real options framework to study CSR investments, but they do not construct a pricing model for investigating CSR investments. According to a review of the literature, this study is the first to derive the closed-form solution of optimal threshold of CSR investments.The main purpose of this study is to construct a dynamic CSR valuation model. This study elucidates the value of CSR and the decision to invest in CSR. Specifically, the value of CSR options facilitates determining whether to invest in CSR, and the optimal threshold for implementing CSR indi...

Společenská Odpovědnost Organizace Z Pohledu Společnosti Poskytující Expresní Kurýrní Služby:

“…Chen et al (2019) poukazují na to, že implementace konceptu CSR je nejistá investice pro společnosti, protože nevědí, co jim náklady a přínosy implementace filosofie CSR přinesou. Na druhé straně mnoho společností v současné době začíná alokovat prostředky na strategické aktivity CSR, protože si uvědomují, že jim to může pomoci zlepšit jejich ekonomické ukazatele v dlouhodobém horizontu (Lee, 2018). Hahn et al (2015) uvádí, že společnosti musí svou ekonomickou udržitelnost zaměřit stejně na ekonomické, environmentální a sociální aspekty, a že jeden aspekt nemůže mít přednost před ostatními, i když to často přináší problémy při rozhodování.…”

“…Jak uvádí Menichini a Rosati (2014), výkon CSR závisí na těch dimenzích a zúčastněných stranách, které jsou skutečně ovlivněny aktivitami společnosti. Lee (2018) uvádí, že většina výzkumů CSR se zaměřuje především na vztahy se zákazníky a vztahy se zaměstnanci zůstávají do značné míry neprozkoumané. Podle autorů je vnímání aktivit CSR zaměstnanci velmi důležité pro vztahy na pracovišti, ale také pro výkon společnosti, protože zaměstnanci, kteří vnímají CSR příznivě, mají pozitivní vztah k organizaci v mnoha oblastech.…”

Time to invest in corporate social responsibility and the value of CSR operations: The case of environmental externalities

“…We consider in this paper a simple model (see Appendix for a general model; see also Lee, ) that illustrates the stories of RWE and E.ON. The basic decision of the firm in our model is to decide whether an investment, which creates negative environmental externalities, should be undertaken right now or postponed.…”

Social sustainable development green brand value in education impact strategic alliance investment decision evaluation

“…The study found that the higher the incidence of multiple unexpected events, the greater the value of the investment opportunity and the longer the wait for the best investment opportunity. Lee (2018) adopted the real options approach to study corporate social responsibility (CSR), which is conducive to the long-term development of a company and can improve corporate reputation. The study clarifies the value of CSR and the decision to invest in CSR.…”