Finance Seminar with Yrjo Koskinen, Boston University
The Department of Finance is proud to announce the upcoming seminar with Yrjo Koskinen, Boston University School of Management.
Yrjo will present:
Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence
Rui Albuquerque, Boston University Católica-Lisboa School of Business and Economics, ECGI and CEPR
Artyom Durnev, University of Iowa
Yrjo Koskinen, Boston University and CEPR
This paper presents an industry equilibrium model where firms can choose to engage in corporate social responsibility (CSR) activities. We model CSR activities as an investment in customer loyalty and show that CSR decreases systematic risk and increases firm value. These effects are stronger for firms producing differentiated goods and when consumers' expenditure share on CSR goods is small. We find supporting evidence for our predictions. In our empirical tests, we address a potential endogeneity problem by instrumenting CSR using data on the political affiliation of the firm's home state, and data on environmental and engineering disasters and product recalls.