Inflation, the Corporate Greed Narrative, and the Value of Corporate Social Responsibility
Type
conference paper
Date Issued
2023-01-01
Author(s)
Abstract
Inflation can significantly undermine companies’ relationships with their customers, employees, and other stakeholders, spawning a crisis of trust. This is particularly true in a period when many citizens accuse corporations of excessively raising prices to maximize profits. Studying the cross-sectional reactions of US stocks to inflation
over the period 2018-2022, we find that in the month following a higher inflation rate, equity investors reward firms with stronger social capital, as proxied by their corporate social responsibility levels. The effect holds using different measures of inflation, including region-specific ones. The inflation-hedging property of CSR is stronger for firms headquartered in Democratic US states (those most exposed to the “corporate greed” narrative of inflation) and for firms with higher customer awareness and intangible capital. Overall, the findings spotlight inflation as a crisis in stakeholder trust
and provide new insights into the importance of social capital for firm value.
over the period 2018-2022, we find that in the month following a higher inflation rate, equity investors reward firms with stronger social capital, as proxied by their corporate social responsibility levels. The effect holds using different measures of inflation, including region-specific ones. The inflation-hedging property of CSR is stronger for firms headquartered in Democratic US states (those most exposed to the “corporate greed” narrative of inflation) and for firms with higher customer awareness and intangible capital. Overall, the findings spotlight inflation as a crisis in stakeholder trust
and provide new insights into the importance of social capital for firm value.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
None
Event Title
Financial Risks Forum 2023
Event Location
Paris
Event Date
March 20-21, 2023
Official URL
Eprints ID
269463
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Name
Mão-de-FerroRamelli_January2023_Inflation,CorporateGreedNarrative,AndValueOfCSR.pdf
Size
565.57 KB
Format
Adobe PDF
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