Corporate Social Responsibility and Investment Efficiency

53 Pages Posted: 20 Feb 2015 Last revised: 12 Jan 2016

See all articles by Mohammed Benlemlih

Mohammed Benlemlih

EM Normandie

Mohammad Bitar

University of Nottingham; Nottingham University Business School

Date Written: January 1, 2015

Abstract

Using a sample of 21,030 US firm-year observations that represents more than 3,000 individual firms over the period 1998-2012, we investigate the relationship between Corporate Social Responsibility (CSR) and investment efficiency. In consistency with our expectations that high CSR firms enjoy low information asymmetry and high stakeholders solidarity (stakeholders theory), we find strong and robust evidence that high CSR involvement decreases investment inefficiency and consequently increases investment efficiency. Moreover, our findings suggest that CSR components that are directly related to firms’ primary stakeholders (e.g. employees’ relations, product characteristics, environment, and Diversity) are more relevant in reducing investment inefficiency as compared to those related to secondary stakeholders (e.g. human rights and community involvement). Finally, additional results show that the effect of CSR on investment efficiency is more pronounced during the subprime crisis. Taken together, our results highlight the important role that CSR plays in shaping firm's investment behavior and efficiency.

Keywords: Corporate social responsibility, Investment efficiency, Stakeholders theory

JEL Classification: G32, O16, M14

Suggested Citation

Benlemlih, Mohammed and Bitar, Mohammad and Bitar, Mohammad, Corporate Social Responsibility and Investment Efficiency (January 1, 2015). Journal of Business Ethics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2566891 or http://dx.doi.org/10.2139/ssrn.2566891

Mohammed Benlemlih (Contact Author)

EM Normandie ( email )

EM Normandie Business School, 64 Rue du Ranelagh,
Paris, Ile de France 57016
France
57016 (Fax)

Mohammad Bitar

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

University of Nottingham ( email )

Nottingham, Québec
Canada

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