Table 1

Main literature on CSP – firm risk relationship

AuthorsSampleNPeriodMeasure of CSPMeasure of firm riskMain empirical results
McGuire et al. (1988)The largest companies in 20–25 industry groups1311983–1985Fortune “responsibility to the community/environment” ratingMarket risk: Systematic risk (Beta) and Total risk (SD of total return)
Accounting risk: debt/assets, operating leverage, SD of operating income		Accounting-based performance predicts CSR better than risk measures
Fombrun and Shanley (1990)Large US companies2921985Fortune surveysSystematic risk (Beta)Corporate reputation assessments are negatively related to market risk
Herremans et al. (1993)Large US manufacturing companies381982–1987Fortune “responsibility to the community/environment” ratingTotal risk (SD of return)Companies with better reputation outperform companies with poorer reputation
Pava and Krausz (1995) CEP socially responsible companies1061985–1987, 1989–1991CEP rankingsSystematic risk (Beta)There is not a clear evidence in the CSP-risk relationship
Boutin-Dufresne and Savaria (2004) Companies listed on the Toronto Stock Exchange4001995–1999Canadian Social Investment databaseIdiosyncratic riskThe adoption of CSR-based codes of conduct lowers companies’ overall business risk
Bassen et al. (2006) World (utilities)442004KLDSystematic risk (Beta)Environmental and social performance decreases systematic risk
Sharfman and Fernando (2008) S&P 500 (USA)2672002KLDSystematic risk (Beta)Environmental performance decreases systematic risk
Luo and Bhattacharya (2009) World5412002–2003Fortune’s Most Admired CompaniesIdiosyncratic riskCSP decreases firm idiosyncratic risk
Lee and Faff (2009) World4001998–2002DJSIIdiosyncratic riskLeading (lagging) corporate social performance (CSP) firms exhibit significantly lower (higher) idiosyncratic risk
Salama et al. (2011) UK1,6251994–2006DJSISystematic risk (Beta)Environmental performance is inversely related to its systematic financial risk
Oikonomou et al. (2012) S&P 500 (USA)7691991–2008KLDSystematic risk (Beta)Corporate Social Irresponsibility is positively and strongly related to financial risk
Jo and Na (2012) USA (sinful industries)5131991–2010KLDSystematic risk (Beta) and Total risk (SD of daily stock returns)Risk reduction through CSR engagement is more significant in controversial industry firms than in non-controversial ones.
Albuquerque et al. (2014)USA4,4622003–2011MSCI ESG databaseSystematic risk (Beta)CSR decreases systematic risk and increases firm value, especially for firms with high product differentiation
Bouslah et al. (2013) USA3,1001991–2007KLDIdiosyncratic and total riskEmployee relations and Human Rights are negatively related to firm risk
Chang et al. (2014) S&P 500 (USA)5831995–2009KLDSystematic (Beta) and total risk (SD stock returns)Institutional CSR activities targeting secondary stakeholders are negatively associated with total and systematic risk
Jo and Harjoto (2014)USA3,0791991–2009KLDTotal risk (SD of daily stock return)Legal (normative) CSR decreases (increases) stock return volatility
Harjoto and Jo (2015)US public companies2,0341993–2009KLDIdiosyncratic risk (Volatility of monthly stock returns)CSR activities volatility of stock return and the cost of capital, and increase firm value
Sassen et al. (2016) Europe9212002–2014Asset4Systematic (Beta), idiosyncratic (annualized SD of the residuals from the Carhart four-factor model) and total risk (SD of daily stock returns)Environmental and social performance decreases idiosyncratic risk, whereas total and systematic risk are only affected in environmentally sensitive industries.
Benlemlih et al. (2018)UK listed companies1,8352005–2013Asset4Systematic (Beta), idiosyncratic (annualized SD of the residuals from the Carhart four-factor model) and total risk (SD of daily stock returns)High Environmental and Social performance mitigate firm’s total and idiosyncratic risk
Chollet and Sandwidi (2018)World3,7872003–2012Asset4Systematic (Beta), idiosyncratic (SD of the residuals from the CAPM model) and total risk (annualized SD of daily stock returns over the past year)Firm's good social and governance performance reduces its financial risk and thereby reinforces its commitment to good governance and environmental practices
Braune et al. (2019)Companies listed in the S&P 100 index1332005–2014Asset4Systematic Risk (Beta)A negative CSP-systematic risk, resulting in a higher financial performance, especially in times of instability and depression in financial markets

Notes:

MSCI = Morgan Stanley Capital International; DJSI = The Dow Jones Sustainability Indices; KLD = Kinder, Lydenberg, and Domini

Source: Authors’ own creation
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