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Corporate social responsibility, stock prices, and tax policy
Author(s) -
Barnea Amir,
Heinkel Robert,
Kraus Alan
Publication year - 2013
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12045
Subject(s) - monetary economics , economics , corporate social responsibility , corporate tax , stock (firearms) , portfolio , stock market , business , microeconomics , tax credit , financial economics , public economics , tax avoidance , mechanical engineering , paleontology , engineering , biology , ecology , horse
We model a market in which some investors get utility from owningshares of firms that engage in corporate social responsibility (CSR). In equilibrium, investors' CSR considerations influence portfolio choices, stock prices, and CSR spending. We study tax policy designed to maximize total giving (individual and corporate) net of government tax breaks and find that its effectiveness is non‐monotonic in the proportion of altruistic investors: with few or many altruistic investors, it has little impact on giving, but, at intermediate levels, effective tax policy intuitively relates the corporate tax rebate rate on giving and the cap on allowable tax savings.