Doing good after doing bad

What is it about?

Corporate social responsibility (CSR) activities enhance firm value via strengthened stakeholder relationships. However, many firms are also involved in corporate social irresponsibility (CSI), which could lead stakeholders to judge CSR actions as insincere, subsequently damaging firm value. This study examines the pivotal role of CSI for CSR’s firm value effects. As an initial finding, the results indicate that CSR’s positive firm value effect is significantly attenuated by the presence of CSI. Offering a more fine-grained analysis, the authors elaborate on the effectiveness of CSR that relates to the same (SD-CSR) or other domains (OD-CSR) as CSI. All else equal, the results indicate that only OD-CSR enhances firm value. Depending upon the CSI context, however, SD-CSR destroys or benefits firm value and OD-CSR is more or less beneficial. By adding new aspects to the discussion about how to align doing good with doing well, the results speak to both theorists and practitioners.

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Photo by Alina Sofia on Unsplash

Photo by Alina Sofia on Unsplash

Why is it important?

This paper tells firms what to do if things go wrong. The study by Isabell Lenz, Hauke A. Wetzel and Maik Hammerschmidt shows when engaging in corporate social responsibility will benefit or hurt firm value.

Perspectives