Over the last few decades, there has been increased academic interest in the concept of Corporate Social Responsibility (Tsoutsoura, 2004; Brammer and Millington, 2006; Quelch and Jocz, 2009; Reverte, 2009). Although prior literature has thrown some light on the factors that may influence firms‟ engagement in CSR practices and initiatives (e.g. Chih et al., 2009; Reverte, 2009), limited research has been conducted in the area of controversial industry sectors (i.e., industry sectors that often are characterized by social taboos and moral debates); there remain issues over which empirical evidence is inconclusive and often contradictory. Our study aims to address this gap in the literature by empirically investigating the determinants of CSR engagement in such industry sectors. Specifically, we focus on six major “sinful” sectors: alcohol, tobacco, gambling, firearms, military, and nuclear power. Using a dataset of 109 U.S. publicly traded corporations over a period of seven years (2003-2009), we identify several factors that influence the above-discussed relationship. Our empirical findings suggest that large unethical corporations are more likely to demonstrate a socially responsible corporate profile so as to legitimize their actions and minimize costs stemming from their interaction with the community. We also argue that sin companies receiving high levels of media coverage find themselves further exposed to public and regulatory scrutiny; thus, many of them undertake serious efforts to integrate CSR into various aspects of their businesses. Additionally, we provide evidence that, by improving their corporate governance, sin firms fulfill stakeholders‟ expectations of legitimate corporate behaviour. Contrary to previous studies (Hill et al., 2007; Hong and Kacperczyk, 2009; Kim and Venkatachalam, 2011), our results suggest that institutional investors might have ceased to consider the social performance of sin firms in making investment decision; instead, they appear to be more interested in the financial performance of these stocks. Last but not least, our results suggest that there is a positive significant relationship between CSR and R&D.
Keywords: Corporate Social Responsibility, Controversial Industry Sectors.
Collections
Show Collections