Corporate social responsibility, stakeholder risk, and idiosyncratic volatility

Idiosyncratic volatility (IV) is a measure of firm specific information that is correlated with lower stock returns. We explore the nexus between IV and corporate social responsibility (CSR) and document that IV is positively correlated with aggregate CSR and is negatively correlated with a CSR-spec...

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Bibliographic Details
Published in:Journal of corporate finance (Amsterdam, Netherlands) Netherlands), 2015-12, Vol.35, p.297-309
Main Authors: Becchetti, Leonardo, Ciciretti, Rocco, Hasan, Iftekhar
Format: Article
Language:English
Subjects:
Corporate social responsibility
Idiosyncratic volatility
Rates of return
Risk exposure
Social responsibility
Stakeholder risk
Stakeholders
Studies
Volatility
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Summary:Idiosyncratic volatility (IV) is a measure of firm specific information that is correlated with lower stock returns. We explore the nexus between IV and corporate social responsibility (CSR) and document that IV is positively correlated with aggregate CSR and is negatively correlated with a CSR-specific (stakeholder) risk factor. Our findings are consistent with the view that CSR reduces flexibility in responding to productive shocks via the reduction of stakeholder well-being, thereby producing the combined effect of making earnings less predictable and reducing exposure to risk of conflicts with stakeholders. •Investigate the nexus between IV and CSR.•IV is idiosyncratic volatility and CSR is corporate social responsibility.•IV and aggregate CSR are positively correlated.•IV is negatively correlated to stakeholder risk factor.•CSR enhances stakeholders' well-being.
ISSN:0929-1199
1872-6313
DOI:10.1016/j.jcorpfin.2015.09.007