To date, the value of corporate social responsibility (CSR) activities has primarily been measured through the company’s reputation, with little attention given to exploring whether there are internal influences between CSR and other management practices. We argue that the efficacy of CSR extends beyond a company’s reputation for managing social and environmental concerns; in particular, it can influence other business practices such as risk management. Our results suggest that (a) overall, firms with better CSR performance are more likely to adopt integrated risk management practices and (b) CSR activities that target both primary stakeholders and secondary stakeholders are equally important in facilitating the adoption of such risk management practices. Theoretically, we contribute to the CSR literature by providing a possible mechanism for risk reduction and insurance-like effects of CSR. Practically, we provide managerial implications demonstrating that the efficacy of CSR should not be viewed in isolation of other business practices.

When can corporate social responsibility become a reliable strategic asset? There is a scarcity of both theoretical arguments and empirical evidence investigating the trade-off between the risk and return of corporate social responsibility. We intend to fill this gap by (1) investigating corporate social responsibility’s simultaneous impact on firm value and the reliability of this impact and (2) exploring the conditions under which corporate social responsibility’s impact on firm value becomes more or less reliable. The presented findings suggest that corporate social responsibility by itself is an unreliable value enhancer, in that it not only increases firm value but also increases the variance of expected value distribution. Yet, the impact of corporate social responsibility on firm value becomes more reliable when a firm has immediately redeployable slack or when a firm has stronger risk management capabilities. This research provides practical implications to managers and investors regarding the riskiness of corporate social responsibility investments and strategies for mitigating such risks.