Environmental and Social Disclosures and Firm Risk

Journal of Business Ethics 152 (3):613-626 (2018)

We examine the link between a firm’s environmental and social disclosures and measures of its risk including total, systematic, and idiosyncratic risk. While we do not find any link between a firm’s E and S disclosures and its systematic risk, we find a negative and significant association between these disclosures and a firm’s total and idiosyncratic risk. These are novel findings and are consistent with the predictions of the stakeholder theory and the resource-based view of the firm suggesting that firms which make extensive and objective E and S disclosures promote corporate transparency that can help them build a positive reputation and trust with their stakeholders. This in turn can help mitigate the firms' idiosyncratic/operational risk. These findings are important for all corporate stakeholders including managers, employees, and suppliers who have a significant economic interest in the survival and success of the firm.
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DOI 10.1007/s10551-016-3285-5
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Risk Management, Real Options, Corporate Social Responsibility.Bryan W. Husted - 2005 - Journal of Business Ethics 60 (2):175-183.

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