The Risk Management Effect of Corporate Social Responsibility on Shareholder Value

Chen, T. J., Shiu, Y. M., and Chang, N. 2015. The Risk Management Effect of Corporate Social Responsibility on Shareholder Value. NTU Management Review, 26 (1): 153-180. doi:10.6226/NTUMR.2015.MAY.R.13011

Tsai-Jyh Chen, Professor, Department of Risk Management and Insurance, National Chengchi University
Yung-Ming Shiu, Professor, Department of Risk Management and Insurance, National Chengchi University
Nina Chang, Account Executive, Aon Taiwan Ltd.

Abstract

Using an event study and data of publicly traded firms in Taiwan from 2005 through 2010, we examine the impact of corporate social responsibility (CSR) on mitigating the declines in shareholder value when firms are disclosed of negative events, i.e., the risk management effect. Our results show that firms engaging in CSR activity have less stock price declines when negative news are disclosed. We also find that this effect is significant for safetyrelated negative events, but not for market-competition and integrity-related events. Furthermore, the empirical results show that CSR has a long-term effect on reducing stock volatility. 


Keywords

corporate social responsibility (CSR)risk managementshareholder value


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