Abstract

The chapter focuses on several major concerns in modern stakeholder management literature through relating CSR policies and business risk, including financial, credit, reputation and strategic risks, with stakeholder behaviour. CSR is perceived as a tool to combine the requirements of various stakeholder groups, which leads to the positive impact on companies’ performance. Positive impact is perceived as employee loyalty, good reputation and financial and credit risk reduction. In many cases it is argued that stakeholders react positively to CSR policies and it leads to potential positive effect–cost reductions or reputation gain. In spite of important insights gained from past research on changing stakeholders’ behaviour, increasing negative pressures and aggressive actions in particular, their links to CSR policies and their effects on financial risks remain underexplored.We argue that company’s financial risks depend upon the capacity to manage CSR policies under stakeholder aggressive actions. Empirical random effect panel data regression model to assess the impact of CSR on financial risk, including mediating stakeholders’ behaviour effect, was developed and tested for a cross-sectional data panel of 1047 European listed companies. CSR was measured by Bloomberg ESG—environmental, social and governance—indicator, while financial risk was measured by downside beta. In order to assess the aggressive stakeholders’ actions, quantitative content analysis was used.The empirical research results show that the stakeholders’ aggressive actions are more intense in case of high CSR level. By adding a temporal dimension, the influence on CSR-level dynamic change on the financial risk, under aggressive stakeholders’ actions, was tested, assessing whether the decreased level of CSR increases company financial risk, under stakeholders’ aggressive actions. The chapter concludes that changes in CSR level effect the changes in the intensity of the stakeholders’ aggressive actions, which effect financial risk. It was observed that the decrease in CSR level causes the increase of stakeholders’ aggressive actions and its influence on financial risk.