Reports on Management Science Findings from Hanyang University Provide New Insights (Risk Management and Corporate Social Responsibility)

2020 SEP 28 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Current study results on Science - Management Science have been published. According to news reporting from Seoul, South Korea, by NewsRx journalists, research stated, “Research Summary We introduce an innovative method of identifying the risk-management benefit of corporate social responsibility (CSR). Option-implied volatility captures the financial markets’ expectations of a firm’s future risk, so if CSR is related to risk-management benefits, it should be related to lower implied volatility.”

Funders for this research include Hankuk University of Foreign Studies Research Fund of 2020, Korean Society of Strategic Management.

The news correspondents obtained a quote from the research from Hanyang University, “We find that CSR is associated with low implied volatility and that CSR’s insurance benefit is larger for firms that have high leverage, growth opportunities, or uncertainty. However, CSR as an insurance mechanism is less beneficial to firms that are already sound (i.e., those that have high market value and good accounting and financial performance). The results reveal the ‘terms’ of a CSR-as-insurance contract, confirm that CSR creates risk-management benefits, and suggest that financial markets price this benefit in economically significant ways. Managerial Summary We suggest a practical technique of evaluating a firm’s CSR policy. For example, a manager would simply check how a firm’s implied volatility changes as its CSR policy changes. Or, the manager can compare a firm’s and its comparable firms’ implied volatilities to knowhow financial markets perceive the firm’s CSR differently. Option implied volatilities could guide a firm to identify proper CSR-based risk-management policies because they have the advantage of being ex ante, real-time, and objectively observable market-pricing information in identifying the risk-management benefit of CSR.”

According to the news reporters, the research concluded: “Our results also illustrate how a financial expert can use the valuable insight of strategic management literature about CSR-as-insurance to price derivative contracts.”

For more information on this research see: Risk Management and Corporate Social Responsibility. Strategic Management Journal, 2020;():. Strategic Management Journal can be contacted at: Wiley, 111 River St, Hoboken 07030-5774, NJ, USA. (Wiley-Blackwell - http://www.wiley.com/; Strategic Management Journal - http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1097-0266)

Our news journalists report that additional information may be obtained by contacting Hyoung-Goo Kang, Hanyang University, Business School, 222 Wangsimni Ro, Seoul 133791, South Korea. Additional authors for this research include Sol Kim and Geul Lee.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1002/smj.3224. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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