Does Corporate Social Responsibility Impact Equity Risk? International Evidence.

We investigate the relationship between corporate social responsibility (CSR) and risk, using measures that capture systematic, idiosyncratic, downside and extreme risks. We analyze the aggregate CSR score as well as its subdimensions. We base our analysis on a large panel of listed firms from 52 countries in the period 2002-2015 and use GMM estimators that allow considering both autoregressive memory in risk measures and possible endogeneity of CSR. Our findings show that CSR has a risk-reducing effect on risk. This effect is stronger in civil-law countries with low security regulation and disclosure requirement levels and in countries where financial information is less widespread. Firms in high-impact or high-profile industries benefit more from CSR than firms in other industries. Similar benefits apply to firms that are not cross-listed. Finally, the financial crisis has increased the risk-reducing effect of CSR.