Sustainable Investment and Corporate Governance Working Papers, Sustainable Investment Research Platform
No 2007/3:
On the Economics of Corporate Responsibility
Tommy Lundgren ()
Abstract: This paper seeks to explore the economic mechanisms behind
corporate social responsibility (CSR) in a micro-economic model of the
firm. The motivation of this study is to shed some light on the potential
causes of the observed phenomena of voluntary over-compliance among firms.
We consider a few diferent models, both static and dynamic, to investigate
how various assumptions about costs and benefits may aspect CSR behavior
through a stock of goodwill capital. Our analysis show that in optimum, the
profit maximizing firm must balance costs and benefits of CSR. From a
cursory look into the CSR literature, we find evidence that some of the
hypotheses that can be derived from the models in this paper can be
verified empirically.
Keywords: corporate social responsibility; dynamics; goodwill; uncertainty; (follow links to similar papers)
39 pages, November 22, 2007
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