Journal
JOURNAL OF BUSINESS FINANCE & ACCOUNTING
Volume 46, Issue 3-4, Pages 494-537Publisher
WILEY
DOI: 10.1111/jbfa.12360
Keywords
corporate social responsibility; firm performance; innovation; investment efficiency; mediation
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We examine two important channels through which corporate social responsibility (CSR) affects firm value: investment efficiency and innovation. We find that firms with higher CSR performance invest more efficiently: these firms are less prone to invest in negative net present value (NPV) projects (overinvestment) and less prone to forego positive NPV projects (underinvestment). We also find that firms with higher CSR performance generate more patents and patent citations. Mediation analysis indicates that firms with higher CSR performance are more profitable and valuable, consequences partially attributable to efficient investments and innovation. These results, robust to alternate model specifications, lend support to enlightened stakeholder theory.
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