Is Corporate Social Responsibility Value Adding? An Analysis for Australian Listed Firms
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This study uses a sample of 325 firms and 2770 firm-year observations covering companies listed on the Australian Stock Exchange for the period 2000 to 2019 to examine the relationship between Corporate Social Responsibly (CSR), Research and development (R&D), market competition level and firm value. I use Tobin’s Q to measure firm value and the Herfindahl-Hirschman index to measure market competition. I find CSR is, in general, value destructive to Australian public firms. In addition, the joint effect of CSR and R&D is negative, suggesting there is a penalty for firm’s undertaking both CSR actions and innovation, or, alternatively, the investments for CSR and R&D are substitutes rather than complements. Additionally, the results do not suggest that product market competition impacts the relationship between CSR and firm value, suggesting that at least for Australian firms, CSR does not appear to bring competitive advantages. This study helps to resolve the CSR-firm value puzzle by incorporating the impact of market competition level and the joint effect of CSR and R&D, and also examines if the relationship found in the US market is consistent in Australia.