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Do shareholders punish or reward excessive CSR engagement? The moderating effect of cash flow and firm growth

Lookup NU author(s): Professor Habiba Al-ShaerORCiD

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This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).

Abstract

Although extensive past research has studied the connection between corporate social responsibility (CSR) and firm value, it has rarely discriminated between optimal and excessive CSR. Thus, we addressed this issue by examining whether shareholders punish or reward excessive CSR engagement through the moderating effect of cash flow and firm growth. We applied country–industry–year fixed-effects (FE) regression to a cross-country sample of 43,803 firm-year observations between 2002 and 2019. The findings show that while both optimal and excessive CSR increase firm value, optimal CSR has greater value relevance than excessive CSR for shareholders. However, although cash flow positively moderates the relationship between optimal and excessive CSR and firm value, firm growth negatively moderates this relationship. The findings are robust regarding alternative CSR proxies, industry-adjusted firm value measures, public governance indicators, and endogeneity concerns.

Publication metadata

Author(s): Al-Shaer H, Uyar A, Kuzey C, Karaman A

Publication type: Article

Publication status: Published

Journal: International Review of Financial Analysis

Year: 2023

Volume: 88

Print publication date: 01/07/2023

Online publication date: 21/04/2023

Acceptance date: 17/04/2023

Date deposited: 17/04/2023

ISSN (print): 1057-5219

ISSN (electronic): 1873-8079

Publisher: Elsevier BV

URL: https://doi.org/10.1016/j.irfa.2023.102672

DOI: 10.1016/j.irfa.2023.102672

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