Crime, Punishment and the Value of Corporate Social Responsibility

44 Pages Posted: 6 Sep 2014 Last revised: 14 Oct 2019

See all articles by Harrison G. Hong

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Jeffrey D. Kubik

Syracuse University - Department of Economics

Inessa Liskovich

University of Texas at Austin - Department of Finance

José A. Scheinkman

Columbia University; Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 14, 2019

Abstract

Using enforcements of the Foreign Corrupt Practices Act, we test the hypothesis that socially responsible (ESG) firms receive lower sanctions from prosecutors. Since virtually all cases are settled by bargaining, we estimate sanction specifications derived from a Nash Bargaining model. To account for ESG firm bribes potentially being unobservably less egregious, we instrument ESG with regulation pages in the state of the firm's headquarters. Our instrumented estimates point to ESG firms receiving 14.3 million dollars or 65% lower sanctions, all else equal. Consistent with our exclusion restriction, pages of state laws are uncorrelated with revenues from bribes.

Keywords: Corporate Social Responsibility, Foreign Corrupt Practices Act, Halo Effect

JEL Classification: D2, D21, D6, D63, D64, G3, G30, G38, K3, K30, K42, M1, M14, M3, M37

Suggested Citation

Hong, Harrison G. and Kubik, Jeffrey D. and Liskovich, Inessa and Scheinkman, José, Crime, Punishment and the Value of Corporate Social Responsibility (October 14, 2019). Available at SSRN: https://ssrn.com/abstract=2492202 or http://dx.doi.org/10.2139/ssrn.2492202

Harrison G. Hong (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Jeffrey D. Kubik

Syracuse University - Department of Economics ( email )

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Inessa Liskovich

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
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United States

José Scheinkman

Columbia University ( email )

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Princeton University - Department of Economics ( email )

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HOME PAGE: http://www.princeton.edu/~joses

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