Effects of Investing in Corporate Social Responsibility on Firm Value

    Research output: Other contribution


    This study investigates how investments in corporate social responsibility (CSR) activities affect firm value. It categorises firms’ CSR activities as strategic or opportunistic based on consistency, and analyses the differential value relevance effect. 

    The study uses the Egyptian Economic Justice Index (EEJI) as the most representative measure for firms' CSR activities in Egypt. To measure valuation effects, it adopts an earnings response coefficient (ERC) model. The main explanatory variables are interaction variables with unexpected earnings and two dummy variables; one indicating CSR activities, and one indicating their consistency. The coefficient for the interaction variable between unexpected earnings and a dummy for CSR activities provides the incremental valuation effect of CSR activities on the relation between earnings and stock returns. Variables are documented as positively and negatively significant.


    Findings show that investing in CSR activities consistently and strategically increase firms profitability and value. Firms that sporadically invest in CSR activities show a smaller relationship between unexpected earnings and stock returns than firms that consistently invest in CSR activities.

    Keywords: Agency costs, Earnings response coefficients, CSR activities, Firm Value, Investment, Strategic, Opportunistic

    Original languageUndefined/Unknown
    Publication statusPublished - 2016


    • Agency cost
    • Earning response coefficient
    • CSR activities
    • Firm value
    • Investment

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