The Effect of Corporate Social Responsibility on Financial Risk

doi:10.6226/NTUMR.202008_30(2).0007

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Title:	The Effect of Corporate Social Responsibility on Financial Risk
Other Titles:	企業社會責任績效對財務風險的影響
Authors:	Hsiao, Li-Peng;Chen, Weitzu;Lin, Jwu-Rong
Keywords:	corporate social responsibility ； market risk ； liquidity risk ； cost of capital
Date:	2016-10-04
Issue Date:	2025-03-20 12:08:11 (UTC+8)
Abstract:	Since the UN Global Compact was proposed in 1999, entrepreneurs and institutions around the world have placed a steadily increasing emphasis on corporate social responsibility (CSR). Accompanying the increased levels of CSR reporting and activities, researchers raise questions regarding whether the aim of a firm's operations is always to maximize shareholder value regardless of other potential motivating factors, an assumption frequently stated in past literature. The present study infers that a firm with superior CSR performance experiences lower market risk and liquidity risk, from empirically assessing the effect of CSR performance on financial risk. The robustness test also finds that superior CSR performance reduces the cost of capital. Furthermore, the study documents that the performance of corporate governance activities increases the cost of capital. Although there is a positive association between corporate governance performance and the cost of capital, prior research suggests that the corporate governance dimension is distinct from other social and environmental dimensions of CSR. Therefore, if the study excludes the corporate governance dimension from CSR activities, the result supports the hypothesis that CSR performance, in sum, is negatively related to the cost of capital.
DOI:	10.6226/NTUMR.202008_30(2).0007
Appears in Collections:	[Graduate Institute & Department of Accounting] Proceeding

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