Corporate social responsibility and shareholder value of restaurant firms

Abstract

In response to recent calls for understanding corporate social responsibility (CSR) and its influence on shareholder value, this study examined the effects of both CSR-strengthening (i.e., strengthening a firm's CSR reputation) and -concerning (i.e., potentially diminishing the reputation) activities of publicly listed restaurant firms on shareholder value. Unlike previous studies on CSR in hospitality literature that only focused on the level of stock returns, this study considered systematic risk as another important determinant of shareholder value. This study tested whether the CSR-strengthening and CSR-concerning actions of restaurant firms are associated with shareholder value based on systematic risk and Tobin's Q. CSR-strengthening actions were found to enhance shareholder value by increasing Tobin's Q, whereas CSR weakening actions reduce shareholder value by increasing the systematic risk of the firm. By analyzing the different effects of CSR-strengthening and CSR-concerning actions, this study provides interesting and important implications for hospitality literature and practitioners of restaurant firms. © 2014 Elsevier Ltd.