We examine whether corporate social responsibility (CSR) is used to signal product quality and whether CSR affects firm value through its positive effect on product market perception. Using a proprietary database, we find that visible CSR, such as environmental and community involvement, positively impacts product market perception, particularly for standardized goods and in competitive industries, and that this impact is more pronounced for product quality attributes. Furthermore, we find that CSR indirectly increases firm value through an improvement in product market perception. We conclude that product market perception is a channel through which CSR creates firm value.
Journal of Corporate Finance
Salavei Bardos, Katsiaryna; Ertugrul, Mine; and Gao, Lucia, "Corporate Social Responsibility, Product Market Perception, and Firm Value" (2020). Business Faculty Publications. 240.
Bardos, Katsiaryna Salavei, Mine Ertugrul, and Lucia Gao. “Corporate Social Responsibility, Product Market Perception, and Firm Value.” Journal of Corporate Finance 62 (2020). https://doi.org/10.1016/j.jcorpfin.2020.101588.