EXPRESS: Doing Safe while Doing Good: Slack, Risk Management Capabilities, and the Reliability of Value Creation Through CSR

When can corporate social responsibility (CSR) become a reliable strategic asset? There is a scarcity of both theoretical arguments and empirical evidence investigating the trade-off between the risk and return of CSR. We intend to fill this gap by (1) investigating CSR’s simultaneous impact on firm value and the reliability of this impact, and (2) exploring the conditions under which CSR’s impact on firm value becomes more or less reliable. The presented findings suggest that CSR by itself is an unreliable value enhancer, in that it increases firm value but also increases the variance of expected value distribution. Yet, the impact of CSR on firm value becomes more reliable when a firm has immediately redeployable slack or when a firm has stronger risk management capabilities. This research provides practical implications to managers and investors regarding the riskiness of CSR investments and strategies for mitigating such risks.