Impact of corporate social responsibility intensity on firm-specific risk and innovation: evidence from Japan

Purpose The purpose of this paper is to investigate investors’ perception of corporate social responsibility (CSR) and its risk-mitigating effects on firm-level innovation in Japan from 2006 to 2017. The authors examine the influence of CSR intensity on firm-specific risks, focusing on the risk-mode...

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Bibliographic Details
Published in:Social responsibility journal 2022-03, Vol.18 (3), p.484-500
Main Authors: Suto, Megumi, Takehara, Hitoshi
Format: Article
Language:English
Subjects:
Asymmetry
Capital markets
Competitive advantage
Corporate governance
Discipline
Disclosure
Innovations
Investments
Investors
Manufacturing
Manufacturing industry
Panel data
R&D
Research & development
Research & development expenditures
Social responsibility
Stakeholders
Sustainability
Volatility
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Summary:Purpose The purpose of this paper is to investigate investors’ perception of corporate social responsibility (CSR) and its risk-mitigating effects on firm-level innovation in Japan from 2006 to 2017. The authors examine the influence of CSR intensity on firm-specific risks, focusing on the risk-moderating effect of CSR on innovation. Design/methodology/approach The authors conducted a simple slope analysis and panel data regressions with input and output innovation measures and idiosyncratic risk based on an asset-pricing model. Findings The results demonstrate that CSR intensity not only reduces firm-specific risk directly but also indirectly by negatively moderating the relationship between firm-level innovation and idiosyncratic risk. Research limitations/implications Signaling trust to capital markets, CSR engagements in the manufacturing industry are clearly important for innovative firms with active research and development undertakings. Practical implications Corporate managers should further expand their efforts to make non-financial disclosures available, considering the interactions between CSR intensity and research and development financial risk. Originality/value In the context of Japanese firms, this study demonstrates the interaction between CSR practices and innovation activities from the perspective of long-term management of corporate sustainability.
ISSN:1747-1117
1758-857X
DOI:10.1108/SRJ-08-2020-0335