Research Paper
FSM - Finance & Strategic ManagementSCIENTIFIC PAPER“CSR as a Risk Management tool” Author(s) of paper: Helene Sierant & Thomas Sierant CPR no.: 010789 – 2338 & 121187- 2515 Date of Submission: December 5, 2012 | |
Abstract
Taking a shareholder perspective, the paper focuses on CSR as a method to reduce idiosyncratic risk. In analyzing this subject, the goal is to complement existing literature on CSR and CFP with the integrative use of risk management and real option theory. Whereas previous research have been ex-posed based and solely consider the reduced risk derived from CSR investments as a benefit among others, this paper encourage proactive incorporation of risk management in the considerations of whether to invest in CSR. The paper’s main differentiation and contribution is a centering on risk management as the purpose for engaging in CSR, and applying real option theory as a basis for ex-ante risk management decision-making. Empirical resolving the research gap and verifying the hypothesis is beyond the scope of this paper. We conclude the paper by considering the implications of the suggested solution and encourage future research within this area.
Introduction
Over the past decades the concept of Corporate Social Responsibility (CSR) has continued to grow in importance and significance due to external pressure of diverse stakeholders, and has thereby become more prominent on companies’ agendas (Carroll & Shabana, 2010; Beurden & Gössling, 2008). The concept of CSR has been subject to considerable debate, commentary, theory building and continues research (Carroll & Shabana, 2010). The question, of whether CSR investments result in financial and social benefits that outweigh its costs, is intensively scrutinized in existing literature (Schreck, 2001; Carroll & Shabana, 2010).
Adherents of CSR argue that it is in the long-term self-interest of corporations to be socially involved (Carroll
Abstract
Taking a shareholder perspective, the paper focuses on CSR as a method to reduce idiosyncratic risk. In analyzing this subject, the goal is to complement existing literature on CSR and CFP with the integrative use of risk management and real option theory. Whereas previous research have been ex-posed based and solely consider the reduced risk derived from CSR investments as a benefit among others, this paper encourage proactive incorporation of risk management in the considerations of whether to invest in CSR. The paper’s main differentiation and contribution is a centering on risk management as the purpose for engaging in CSR, and applying real option theory as a basis for ex-ante risk management decision-making. Empirical resolving the research gap and verifying the hypothesis is beyond the scope of this paper. We conclude the paper by considering the implications of the suggested solution and encourage future research within this area.
Introduction
Over the past decades the concept of Corporate Social Responsibility (CSR) has continued to grow in importance and significance due to external pressure of diverse stakeholders, and has thereby become more prominent on companies’ agendas (Carroll & Shabana, 2010; Beurden & Gössling, 2008). The concept of CSR has been subject to considerable debate, commentary, theory building and continues research (Carroll & Shabana, 2010). The question, of whether CSR investments result in financial and social benefits that outweigh its costs, is intensively scrutinized in existing literature (Schreck, 2001; Carroll & Shabana, 2010).
Adherents of CSR argue that it is in the long-term self-interest of corporations to be socially involved (Carroll