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Journal of Business Ethics

, Volume 148, Issue 3, pp 647–671 | Cite as

Corporate Social Responsibility and Investment Efficiency

Article

Abstract

Using a sample of 21,030 US firm-year observations that represents more than 3000 individual firms over the 1998–2012 period, we investigate the relationship between Corporate Social Responsibility (CSR) and investment efficiency. We provide strong and robust evidence that high CSR involvement decreases investment inefficiency and consequently increases investment efficiency. This result is consistent with our expectations that high CSR firms enjoy low information asymmetry and high stakeholder solidarity (stakeholder theory). Moreover, our findings suggest that CSR components that are directly related to firms’ primary stakeholders (e.g. employee relations, product characteristics, environment, and diversity) are more relevant in reducing investment inefficiency compared with those related to secondary stakeholders (e.g. human rights and community involvement). Finally, additional results show that the effect of CSR on investment efficiency is more pronounced during the subprime crisis. Taken together, our results highlight the important role that CSR plays in shaping firms’ investment behaviour and efficiency.

Keywords

Corporate social responsibility Corporate governance Investment efficiency Stakeholders theory 

JEL Classification

G32 O16 M14 

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Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  1. 1.University of Grenoble AlpesGrenoble Cedex 9France
  2. 2.David O’Brien Centre for Sustainable EnterpriseConcordia UniversityMontréalCanada

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