Embracing certainty in uncertain times: Macroeconomic uncertainty, third-party assurance, and CSR performance

Abstract

Our study investigates whether macro-level uncertainty on the future economic prospects, referred to as macroeconomic uncertainty, affects corporate social responsibility (CSR) performance. Two competing theories, namely, the real options theory and the risk management theory, offer different perspectives on whether firms would increase or decrease their CSR performance in response to macroeconomic uncertainty. Existing literature documents inconclusive empirical evidence about this matter. Employing a novel and unbiased measure of macroeconomic uncertainty and drawing upon data from U.S. firms between 2006 and 2017, we find that CSR performance is negatively associated with macroeconomic uncertainty. We also document that the negative association between macro uncertainty and CSR performance is attenuated for firms that have their CSR reports independently assured by third-party experts. The results are robust to controlling for firm characteristics, an alternative measure of macroeconomic uncertainty, and an alternative sample period excluding the 2008–2009 Financial Crisis.