Corporate social responsibility, stakeholder risk, and idiosyncratic volatility

Idiosyncratic volatility (IV) is a measure of firm specific information that is correlated with lower stock returns. We explore the nexus between IV and corporate social responsibility (CSR) and document that IV is positively correlated with aggregate CSR and is negatively correlated with a CSR-specific risk factor (stakeholder). Our findings are consistent with the view that CSR reduces flexibility in responding to productive shocks via the reduction of stakeholder well-being, thereby making earnings less predictable even though there is less exposure to risk of conflicts with stakeholders.