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http://dx.doi.org/10.13106/jafeb.2021.vol8.no3.0953

Corporate Social Responsibility and Firm Risk: Controversial Versus Noncontroversial Industries  

ERIANDANI, Rizky (Department of Accounting, Faculty of Business and Economics, Universitas Surabaya)
WIJAYA, Liliana Inggrit (Department of Management, Faculty of Business and Economics, Universitas Surabaya)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.3, 2021 , pp. 953-965 More about this Journal
Abstract
This study aims to analyze the benefits of corporate social responsibility (CSR) performance on corporate risk in controversial and non-controversial industries. The hypothesis of this study is based on the conflicting effects of industry type on CSR and firm risk. The research sample consisted of 927 companies listed on the Indonesia Stock Exchange from 2016 to 2019. The main method for data processing was the ordinary least square method and subgroup analysis as a robustness test. The findings suggest that the performance of CSR can reduce corporate risk. However, the impact was only significant for non-controversial firms and weakened for controversial industries. These results support risk management and signaling theory. Firm risk in this study reflects the company's total risk, further research can categorize it into systematic and idiosyncratic risk. Besides, the number of samples of controversial industry research is not as much as non-controversial; further research can use paired samples. Regulators can use the results to create a new policy regarding CSR implementation. This study contributes to the existing literature by showing that the ability of social responsibility to reduce corporate risk only works in non-controversial industries. This result may be due to the controversial industry receiving negative stigma from its stakeholders.
Keywords
Corporate Social Responsibility; Firm Risk; Controversial Industry; Systematic Risk; Perceived CSR;
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