SSRN-Financial Constraints on Corporate Goodness by Harrison Hong, Jeffrey Kubik, Jose Scheinkman

SSRN-Financial Constraints on Corporate Goodness by Harrison Hong, Jeffrey Kubik, Jose Scheinkman:

"Goodness is costly and its marginal benefit is finite; as a result, less-constrained firms spend more on goodness. We verify that less-constrained firms do indeed have higher social responsibility scores. Our empirical analysis addresses identification issues that have long plagued the corporate social responsibility literature, establishing the causality of this relationship using a natural experiment. During the technology bubble, previously constrained firms experienced a temporary relaxation of their constraints and their goodness scores also temporarily increased relative to their previously unconstrained peers. This convergence applies to all components of the goodness scores such as community and employee relations and environmental responsibility but not governance."

Will DEFINITELY make it to the classroom this semester!