CSR and firm risk: Is shareholder activism a double-edged sword?

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dc.contributor.authorBozos, Konstantinos
dc.contributor.authorKing, Timothy
dc.contributor.authorKoutmos, Dimitrios
dc.date.accessioned2023-01-05T16:22:58Z
dc.date.available2023-01-05T16:22:58Z
dc.date.issued2022-11-21
dc.description.abstractFew can argue with the notion that corporations should at least consider corporate social responsibility (CSR) to better understand the impact of their operations on society. However, recent empirical tests suggest CSR has an ambiguous impact on firm performance. To shed new light on this debate, we examine the extent to which voting support for nonbinding shareholder-initiated CSR proposals is empirically linked to changes in firms’ underlying systematic risks. Using a rich dataset of proposals in the US from 1998 to 2011, we contribute several novel findings. First, we show that shareholder voting support is nonlinearly linked to changes in systematic risk. Specifically, proposals with low voting support increase risk while those with high support decrease risk. This nonlinearity is particularly pronounced for consumer-sensitive firms that cater primarily to individual consumers rather than for firms in non-consumer-sensitive industries that produce goods or services meant for industrial or governmental use. Second, the 2007–2009 financial crisis exacerbated increases in firms’ systematic risks for proposals with low voting support. Our results, which highlight asymmetry regarding firms’ CSR initiatives, remain robust when controlling for firm-specific factors as well as shifts in investor sentiment. From a risk management perspective, our findings suggest that CSR initiatives need strong shareholder support to realize benefits from the so-called ‘risk reduction hypothesis’.en_US
dc.description.sponsorshipThis research received no external funding.en_US
dc.identifier.citationBozos, Konstantinos, Timothy King, and Dimitrios Koutmos. 2022. CSR and Firm Risk: Is Shareholder Activism a Double-Edged Sword? Journal of Risk and Financial Management 15: 543. https://doi.org/10.3390/ jrfm15110543en_US
dc.identifier.doihttps://doi.org/10.3390/jrfm15110543
dc.identifier.urihttps://hdl.handle.net/1969.6/94856
dc.language.isoen_USen_US
dc.rightsAttribution 4.0 International*
dc.rights.urihttp://creativecommons.org/licenses/by/4.0/*
dc.subjectcorporate social responsibilityen_US
dc.subjectnonbinding votingen_US
dc.subjectshareholder activismen_US
dc.subjectsystematic risken_US
dc.titleCSR and firm risk: Is shareholder activism a double-edged sword?en_US
dc.typeArticleen_US

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