Investigating the Efficacy of Corporate Social Responsibility from A Risk Management Perspective

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Should a profit-seeking firm invest its valuable resources in corporate social responsibility (CSR) activities? This question has been argued by academic scholars and practitioners for decades, yet current literature attempting to answer this question shows a great inconsistency in both theoretical arguments and empirical tests. Stemming from the instrumental stakeholder theory, the instrumental view of CSR justifies the intrinsic motivation of managers to contribute to the social wellbeing with economic benefit to shareholders. This dissertation attempts to contribute to the instrumental view of CSR from the risk management perspective.Through three essays I intend to answer the general research questions regarding how CSR impacts, and is impacted by, firm risk portfolio. The goal of this dissertation is to answer the following questions that lack theoretical and empirical understanding: (1) under what risk context do investors perceive CSR as value-enhancing, and under what risk context do they perceive CSR as value-destroying? (2) Can CSR impact firm risk “from inside out” rather than “from outside in”, i.e., Can CSR impact risk by influencing a firm’s risk management decisions rather than influencing stakeholder behaviours? (3) What is CSR’s impact on risk as a combination of ex-ante probability and ex-post severity?The findings of the first essay establish the contingencies that lead to a positive effect of the risk reduction mechanisms. Specifically, the results show that the risk reduction mechanism of CSR is only effective when a firm operates in a high-risk environment and/or have a high earning potential. The findings in the second essay expand the source of the risk reduction mechanism from external influence of stakeholder behaviour to internal influence of a firm’s own decision making. That is, CSR can reduce risk because it creates unique knowledge that will facilitate the adoption of an integrated risk management practice. The third essay contributes toiiithe current literature by integrating CSR’s impact on liability risk into a combined effect of ex-ante probability reduction and ex-post severity reduction, thus providing a holistic view of CSR’s impact on risk. Taken together, the three essays attempt to investigate when and how the risk reduction mechanism of CSR works. I hope this dissertation contributes to the current understanding of the efficacy of CSR from the risk management perspective and answers the call to extend theories in CSR.
Corporate Social Responsibility, Firm Performance, Risk Reduction Mechanism, Risk, Stakeholder Theory
Lu, H. (2020). Investigating the Efficacy of Corporate Social Responsibility from A Risk Management Perspective (Doctoral thesis, University of Calgary, Calgary, Canada). Retrieved from