International Evidence on the Nexus between Corporate Social Responsibility and Firm Risk: Do Board Diversity and CSR Committee Matter?

Abstract

The key objectives of this paper are twofold: first, the study examines the nexus between Corporate Social Responsibility (CSR) and firm risk management in international settings. Second, the study tests the moderating impact of board diversity and CSR committee on the association between CSR and firm risk. Based on the panel sample of 4034 firms from 39 countries, the study's results show that high CSR engagement is associated with a decrease in firm risk: systematic risk and total risk. Moreover, the negative effect of CSR on firm risk is moderated by board diversity proxied by the Blau index of female and male directors. However, the findings do not display the moderating role of the CSR committee in the CSR and firm risk relationship. The main results are re-examined through the endogeneity test using the 2SLS specification, and the results remain stable. This study contributes to the current literature by confirming that CSR can be employed as a risk mitigation tool worldwide, while board diversity is a key governance channel that can further enhance the CSR's risk mitigation ability.

       Keywords: corporate social responsibility, firm risk, board diversity, CSR committee, corporate governance