Goss, Allen. “Corporate social performance and idiosyncratic risk: A variance decomposition analysis.” Working paper (Ryerson University), 2013.
From the author's abstract: "I investigate the relationship between corporate social responsibility and idiosyncratic risk using a 17 year panel of over 3,269 US listed companies. Following Vuolteenaho (2002), I use a three state vector autoregressive model of expected returns and optimally scaled principal components analysis to generate aggregate measures of CSR strengths and concerns, I find higher concerns are related to higher volatility of unexpected earnings and discount rates. Higher CSR strengths are associated with lower idiosyncratic variance. Partitioning the sample into positive and negative earnings shocks, I find that CSR strengths decrease the variance of negative returns, but increase the variance of positive returns, consistent with the notion that investments in social responsibility provide insurance against negative earnings shocks."