Quarterly Publication

Document Type : Original Article

Authors

1 Department of Accounting, Faculty of Management and Economic, Qom University, Qom, Iran.

2 Faculty of Management, Islamic Azad University–Tehran North Branch, Tehran, Iran

Abstract

It seems that paying attention to social responsibility by companies can lead to a better stakeholder’s view toward the company, thereby increasing their loyalty and trust. Having the ability to obtain more financial resources in times of crisis, due to the greater loyalty of investors, will result in reducing the company risk. In contrast, being overconfident about the loyalty of individuals to the company can lead to keeping a short-term debt structure, thereby increasing the risk of obtaining financial resources. Recently, the negative impacts of petrochemical companies on the environment have made social and environmental groups focus more on this industry, and this focus has pushed companies into involving in more social activities. Considering the potential impact of CSR on the company’s risk, this study examines the relationship between corporate social responsibility and value at risk in petrochemical industry using a sample of 27 companies listed on the Tehran Stock Exchange during the 2010-2017 period. Eviews 10 is used for computing and analyzing the data, and the generalized auto regressive conditional heteroskedasticity (GARCH) model is employed to estimate value at risk. The results indicate a negative and statistically significant relationship between corporate social responsibilities and company value at risk.
 
 

Keywords

Arouri, M; & Pijourlet, G. (2015). CSR performance and the value of cash holdings: International evidence. Journal of Business Ethics, 1-22. Benlemlih, Mohammed and Girerd-Potin, Isabelle,(2017). Corporate Social Responsibility and Firm Financial Risk Reduction: On the Moderating Role of the Legal Environment. Available at SSRN: https://ssrn.com/abstract=2923739 
Bolu, G., Jahan-Ara, T. (2017). Effects of International Barriers and Limitations on Natural Gas Production in Iran. Petroleum Business Review, 1(1), 29-39. 
Cheung, A. (2016). Corporate social responsibility and corporate cash holdings, Journal of Corporate Finance, 37,412-415. 
Christoffersen, P. & Gonçalves, S. (2004). Estimation risk in financial risk management. 
CIRANO. Fabrizi, M., Mallin, C., & Michelon, G. (2014). The role of CEO’s personal incentives in driving corporate social responsibility. Journal of Business Ethics, 124(2), 311-326. 
Godfrey, P. C., Merrill, C. B., & Hansen J. M. (2005). The relationship between corporate philanthropy and shareholder wealth: a risk management perspective. Academy of Management Review, 30(4), 777-798. 
Godfrey, P. C., Merrill, C. B., & Hansen, J. M. (2009). The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis. Strategic Management Journal, 30, 425–445. 
Gujarati, Damodar N., and Dawn C. Porter. )2009(. Basic econometrics. Boston, Mass: McGraw-Hill. 
Hassas Yeganeh, Yahya and Ghodratollah, Barzegar, (2013). Identifying the Components and Indicators of Corporate Social Responsibility in Iran. scds. 2013; 2 (1) :209-234 URL: http://journals.sabz.ac.ir/scds/article-1-67-en.html 
Jo, H., & Na, H. (2012). Does CSR reduce firm risk? Evidence from controversial industry sectors. Journal of Business Ethics, 110 (4), 441-457.
Jha, Anand & Cox, James, (2015). Corporate social responsibility and social capital, Journal of Banking & Finance, Elsevier, vol. 60(C), pages 252-270. Jenkins, R. (2005). Globalization, corporate social responsibility and poverty. International affairs, 81(3), 525-540. https://doi. org/10.1111/j.1468-2346.2005.00467.x 
Jiraporn, P., & Chintrakarn, P. (2013). How do powerful CEOs view corporate social responsibility (CSR)? An empirical note. Economics Letters, 119(3), 344-347. 
Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of Management Review, 20(2), 404–437. Knudsen, Jette Steen, (2017). Government Regulation of Corporate Social Responsibility (CSR): Implications for Corporate Governance. Ciaran Driver and Grahame Thompson (eds.) Corporate Governance in Contention, Oxford University Press, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3045494 
Kytle, B., & Ruggie, J. G. (2005). Corporate social responsibility as risk management: A model for multinationals. Working paper, Harvard University. 
Lahrech, H. (2011). Disarming the value killers: CSR viewed through a sharp risk management lens. Working paper, University of Nottingham. Llacay, Bàrbara & Peffer, Gilbert, )2017(. Impact of value at risk models on market stability, Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 223-256. 
Mishra, S., & Modi, S. B. (2013). Positive and negative corporate social responsibility, financial leverage, and idiosyncratic risk. Journal of Business Ethics, 117(2), 431-448.
Mohamed, A. R. (2005). Would students T-GARCH improve VaR estimates?. Master Thesis, University of Jyvaskyla, Finland. 
Orlitzky, Marc and Benjamin, John D.(2001) Corporate Social Performance and Firm Risk: A Meta-Analytic Review, BUSINESS & SOCIETY, Vol. 40 No. 4, 369-396 https://doi. org/10.1177/000765030104000402 
Oikonomou, I., Brooks, C., & Pavelin, S. (2012). The impact of corporate social performance on financial risk and utility: A longitudinal analysis. Financial Management, 41(2), 483-515. 
Orhan, Mehmet and Köksal, Bülent,(2011). A Comparison of GARCH Models for VAR Estimation. Expert Systems with Applications, Vol. 39, No. 3, pp. 3582-3592, 2012. Available at SSRN: https://ssrn.com/abstract=1937638 Parsa, H. G., Lord, K. R., Putrevu, S., & Kreeger, J. (2015). Corporate social and environmental responsibility in services: will consumers pay for it?. Journal of retailing and consumer services, 22, 250-260. 
Pierre Chollet, Blaise W. Sandwidi ,(2017). CSR engagement and financial risk: A virtuous circle? International evidence. doi:10.1016/j.gfj.2018.03.004 
Revelli, Christophe and Viviani, Jean Laurent. (2015)., Financial Performance of Socially Responsible Investing (SRI): What Have We Learned? A MetaffAnalysis. Business Ethics: A European Review, Vol. 24, Issue 2, pp. 158-185, 2015. Available at SSRN: https://ssrn.com/abstract=2577035 
Scherer, A. G., & Palazzo, G. (2012). The New Political Role of Business in a Globalized World—A Review of a New Perspective on CSR and Its Implications for the Firm, Governance, and Democracy. In Nachhaltigkeit (pp. 15-50). Gabler Verlag, Wiesbaden. 
Won Oh & Young Chang & Aleksey Martynov, (2011). The Effect of Ownership Structure on Corporate Social Responsibility: Empirical Evidence from Korea, Journal of Business Ethics, Springer, vol. 104(2), pages 283-297, December