CSR and Investors

Question 1

What role do investors play in CSR?

Answer 1

They can influence firm strategies and valuation through their preferences.

Question 2

What is SRI?

Answer 2

Socially Responsible Investing

Question 3

How can CSR lower a firm’s cost of capital?

Answer 3

By attracting investors willing to accept lower returns for social impact

Question 4

What did Barber et al. study?

Answer 4

Investor willingness to sacrifice returns for social impact

Question 5

What is a discrete choice model?

Answer 5

A method to estimate preferences based on observed choices

Question 6

What does “marginal willingness to pay” indicate?

Answer 6

The return investors forgo for high social impact

Question 7

What was the finding of Heeb et al.?

Answer 7

Investors valued sustainability but not increased impact

Question 8

What is the “emotional” impact of sustainable investments?

Answer 8

Investors derive satisfaction from supporting sustainable firms

Question 9

How does sustainability enhance firm value?

Answer 9

By reducing the cost of funding

Question 10

What is the role of institutional investors in CSR?

Answer 10

They drive demand for sustainability in firm practices?

Question 11

What is the relationship between CSR and mutual fund inflows?

Answer 11

Funds with high sustainability ratings attract more investments

Question 12

How does ESG affect equity cost of capital?

Answer 12

Lower environmental scores increase equity cost of capital

Question 13

How does ESG affect debt cost of capital?

Answer 13

Poor environmental performance increases loan spreads

Question 14

What is the role of environmental concerns in firm valuation?

Answer 14

They are linked to higher costs of capital

Question 15

What drives higher costs of capital for environmentally poor firms?

Answer 15

Investor preferences and mandates for SRI

Question 16

What is the toy model of sustainable investing?

Answer 16

A framework showing how sustainable choices enhance firm and societal value

Question 17

How do normal investors differ from sustainable investors?

Answer 17

Normal investors ignore pollution; sustainable investors consider it

Question 18

What are the main channels of CSR impact on firm value?

Answer 18

Cost of capital, customer demand, and labor supply

Question 19

What is the “inverse U” relationship in CSR?

Answer 19

CSR’s financial impact improves up to a point but declines beyond it

Question 20

What does Renneboog et al. suggest about ESG funds?

Answer 20

ESG funds underperform in normal times but outperform during crises

Question 21

What is the role of consumer awareness in CSR?

Answer 21

It amplifies the financial benefits of CSR

Question 22

What did Chava find about environmental concerns?

Answer 22

They increase both equity and debt costs for firms

Question 23

What does CSR’s financial impact depend on?

Answer 23

Stakeholder responses and firm characteristics

Question 24

Why do institutional investors prefer sustainable firms?

Answer 24

Due to mandates for ethical investing

Question 25

How does sustainability influence shareholder value?

Answer 25

It aligns long-term returns with social goals

Question 26

What is the main takeaway about CSR and investors

Answer 26

Investor preferences can create financial incentives for CSR

Question 27

How do field experiments contribute to CSR studies?

Answer 27

By revealing real-world investor behavior

Question 28

What is the policy implication of CSR and cost of capital findings?

Answer 28

Governments can leverage investor preferences to promote CSR

Question 29

What is the overall conclusion about CSR and firm value?

Answer 29

CSR’s impact varies by context and stakeholder involvement