Are red or blue companies more likely to go green? Politics and corporate social responsibility

Alberta Di Giuli and Leonard Kostovetsky

Journal of Financial Economics, 2014, vol. 111, issue 1, 158-180

Abstract: Using the firm-level corporate social responsibility (CSR) ratings of Kinder, Lydenberg, Domini, we find that firms score higher on CSR when they have Democratic rather than Republican founders, CEOs, and directors, and when they are headquartered in Democratic rather than Republican-leaning states. Democratic-leaning firms spend $20 million more on CSR than Republican-leaning firms ($80 million more within the sample of S&P 500 firms), or roughly 10% of net income. We find no evidence that firms recover these expenditures through increased sales. Indeed, increases in firm CSR ratings are associated with negative future stock returns and declines in firm ROA, suggesting that any benefits to stakeholders from social responsibility come at the direct expense of firm value.

Keywords: Corporate social responsibility; Corporate culture; Politics (search for similar items in EconPapers)
JEL-codes: G34 M14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (364)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:111:y:2014:i:1:p:158-180

DOI: 10.1016/j.jfineco.2013.10.002

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