Abstract
| Language | English |
|---|---|
| Place of Publication | Rochester, N.Y. |
| Number of pages | 50 |
| DOIs | |
| Publication status | Published - 28 Jan 2019 |
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Keywords
- CSR
- social capital
- risk
- gubernatorial elections
- tariff shocks
- operational hedge
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Can social capital and reputation mitigate political and industry-wide economic risk? / Andriosopoulos, Dimitris; Deepty, Sheikh Tanzila.
Rochester, N.Y., 2019.Research output: Working paper
TY - UNPB
T1 - Can social capital and reputation mitigate political and industry-wide economic risk?
AU - Andriosopoulos, Dimitris
AU - Deepty, Sheikh Tanzila
PY - 2019/1/28
Y1 - 2019/1/28
N2 - Firms’ social capital, captured by corporate social responsibility (CSR), can serve as an operational hedging instrument for firm-specific negative shocks. This paper assess CSR’s hedging effectiveness against risks arising from political uncertainty and industry-wide economic shocks. We find that CSR has a significant mitigating effect on stock return volatility making it an effective reputational hedge against political risk such as gubernatorial elections, especially for closely contested elections. However, CSR’s hedging is effective only for market risk (stock volatility) and not for cash flow volatility. Meanwhile, a difference-in-difference estimation suggests that CSR is not an effective hedge against risk during industry-wide economic shocks. Finally, CSR’s mitigating effect on stock volatility is transient.
AB - Firms’ social capital, captured by corporate social responsibility (CSR), can serve as an operational hedging instrument for firm-specific negative shocks. This paper assess CSR’s hedging effectiveness against risks arising from political uncertainty and industry-wide economic shocks. We find that CSR has a significant mitigating effect on stock return volatility making it an effective reputational hedge against political risk such as gubernatorial elections, especially for closely contested elections. However, CSR’s hedging is effective only for market risk (stock volatility) and not for cash flow volatility. Meanwhile, a difference-in-difference estimation suggests that CSR is not an effective hedge against risk during industry-wide economic shocks. Finally, CSR’s mitigating effect on stock volatility is transient.
KW - CSR
KW - social capital
KW - risk
KW - gubernatorial elections
KW - tariff shocks
KW - operational hedge
U2 - 10.2139/ssrn.3316174
DO - 10.2139/ssrn.3316174
M3 - Working paper
BT - Can social capital and reputation mitigate political and industry-wide economic risk?
CY - Rochester, N.Y.
ER -