Firm litigation risk and the insurance value of corporate social performance
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
| Original language | English |
|---|---|
| Pages (from-to) | 1464-1482 |
| Journal / Publication | Strategic Management Journal |
| Volume | 35 |
| Issue number | 10 |
| Online published | 4 Jul 2013 |
| Publication status | Published - Oct 2014 |
Link(s)
Abstract
This paper advances the risk management perspective that superior social performance enhances firm value by serving as an ex ante valuable insurance mechanism. We posit that good social performance is more valuable as an insurance mechanism for firms with higher litigation risks. Moreover, value generation of corporate social performance (CSP) depends on whether a firm has gained pragmatic legitimacy (i.e., a firm's financial health) and moral legitimacy (i.e., whether or not a firm operates in a socially contested industry) among its stakeholders. We find that the value of CSP as insurance against litigation risk is practically significant, adding 2 to 4 percent to firm value. But CSP is less likely to create value if the firm is in financial distress or is operating in socially contested industries. Copyright © 2013 John Wiley & Sons, Ltd. Copyright © 2013 John Wiley & Sons, Ltd.
Research Area(s)
- corporate social performance, firm valuation models, insurance value, legitimacy, risk management
Citation Format(s)
Firm litigation risk and the insurance value of corporate social performance. / KOH, Ping-Sheng; QIAN, Cuili; WANG, Heli.
In: Strategic Management Journal, Vol. 35, No. 10, 10.2014, p. 1464-1482.Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
