Kim, Li, and Li (2014)
Kim, Yongtae, Haidan Li, and Siqi Li. “Corporate social responsibility and stock price crash risk.” Journal of Banking and Finance, February 18, 2014.
From the authors' abstract: "This study investigates whether corporate social responsibility (CSR) mitigates or contributes to stock price crash risk. Crash risk, defined as the conditional skewness of return distribution, captures asymmetry in risk and is important for investment decisions and risk management... We find that firms' CSR performance is negatively associated with future crash risk after controlling for other predictors of crash risk. The result holds after we account for potential endogeneity. Moreover, the mitigating effect of CSR on crash risk is more pronounced when firms have less effective corporate governance or a lower level of institutional ownership. The results are consistent with the notion that firms that actively engage in CSR also refrain from bad news hoarding behavior and thus reducing crash risk. This role of CSR is particularly important when governance mechanisms, such as monitoring by boards or institutional investors, are weak."
LK comment: Strong paper. Moskowitz Prize Honorable Mention in 2014. Perhaps crash risk doesn’t matter much to well-diversified investors, but this seems very relevant to investors who are stuck with a lot of idiosyncratic risk through concentrated holdings (e.g., founders, or managers with large equity stakes). Underlying logic/methodology follows Chen, Hong, and Stein (2000), which see.