Corporate Social Responsibility, Stocks Prices and Tax Policy

Canadian Journal of Economics, August 2013

42 Pages Posted: 21 May 2009 Last revised: 14 Jun 2013

See all articles by Amir Barnea

Amir Barnea

HEC Montreal

Robert L. Heinkel

University of British Columbia (UBC) - Division of Finance

Alan Kraus

University of British Columbia (UBC) - Division of Finance

Date Written: May 20, 2009

Abstract

We model a capital market in which some proportion of investors get utility from owning firms that undertake spending on corporate social responsibility (CSR). We also assume different categories of firms: those with good CSR fundamentals and those with poor CSR fundamentals. We develop an equilibrium in which investors' CSR considerations influence their financial portfolio decisions, influencing stock prices and corporate CSR spending decisions. An important determinant of the equilibrium is the proportion of altruistic investors in the market. Besides providing a model with reasonable empirical predictions, we also examine optimal tax policy questions, looking to maximize total individual donations plus corporate CSR spending less the tax rebates given for such spending.

Keywords: Corporate Social Responsibility, Tax Policy

Suggested Citation

Barnea, Amir and Heinkel, Robert L. and Kraus, Alan, Corporate Social Responsibility, Stocks Prices and Tax Policy (May 20, 2009). Canadian Journal of Economics, August 2013, Available at SSRN: https://ssrn.com/abstract=1407832 or http://dx.doi.org/10.2139/ssrn.1407832

Amir Barnea (Contact Author)

HEC Montreal ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-7321 (Phone)
514-340-5632 (Fax)

Robert L. Heinkel

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8347 (Phone)
604-822-8521 (Fax)

Alan Kraus

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8342 (Phone)
604-822-8521 (Fax)

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