Does corporate social responsibility affect shareholder value? Evidence from the COVID‐19 crisis

• Published date: 01 June 2022
• Author: Somya Arora,Jagan Kumar Sur,Yogesh Chauhan
• Date: 01 June 2022
• DOI: http://doi.org/10.1111/irfi.12353

SHORT REPORT

Does corporate social responsibility affect

shareholder value? Evidence from the

COVID-19 crisis

Somya Arora | Jagan Kumar Sur | Yogesh Chauhan

Department of Finance and Accounting,

Indian Institute of Management Raipur,

Raipur, India

Correspondence

Yogesh Chauhan, Department of Finance and

Accounting, Indian Institute of Management

Raipur, Atal Nagar, P. O. –Kurru (Abhanpur),

Raipur (C.G.) 493 661, India.

Email: yogesh@iimraipur.ac.in

Abstract

The COVID-19 outbreak and the subsequent lockdown

were an unanticipated shock to the global stock market.

Managers also had minimal time to counterbalance its effect

through corporate policies. Therefore, this health crisis

offers a unique opportunity to examine the effect of corpo-

rate social responsibility (CSR) on shareholder value. We

observe that firms engaged in more CSR activities out-

perform other firms. This suggests that CSR plays a positive

role in determining shareholder value, particularly for an

emerging market where minority shareholder rights are

weak. Collaborating with our main finding, we further find

that governance metrics play a significant role.

KEYWORDS

COVID-19, CSR activities, India, shareholder value

JEL CLASSIFICATION

D22; G32; G34; M14

1|INTRODUCTION

Does corporate social responsibility (CSR) affect firm value (shareholder value)? Existing studies provide mixed find-

ings (see Bernanke, Gertler, & Gilchrist, 1999; Friede, Busch, & Bassen, 2015; Lins, Servaes, & Tamayo, 2017; Mar-

golis, Elfenbein, & Walsh, 2007; Margolis & Walsh, 2003; Renneboog, Ter Horst, & Zhang, 2008). On the one hand,

researchers argue that high-CSR activities resolve agency conflicts stemming from the conflicts of interest between

management and other stakeholders (shareholders and non-investing stakeholders), thereby improving firm perfor-

mance and value (Cespa & Cestone, 2007; Jensen, 2001; Jo & Harjoto, 2011; Scherer, Palazzo, & Baumann, 2006;

Received: 22 January 2021 Revised: 6 April 2021 Accepted: 13 May 2021

DOI: 10.1111/irfi.12353

© 2021 International Review of Finance Ltd.

International Review of Finance. 2022;22:325–334. wileyonlinelibrary.com/journal/irfi 325