Corporate social (ir)responsibility and firm risk: The role of corporate governance

Abstract We study how corporate governance moderates the relationship between corporate social responsibility (CSR), corporate social irresponsibility (CSI), and firm risk. We find that CSR reduces risk for firms with strong governance. In contrast, CSI increases firm risk more significantly for firms with stronger governance, suggesting that backlash is more severe when well‐governed firms engage in irresponsible behavior. Overall, our evidence indicates that the negative impact of CSI for well‐governed firms outweighs the risk‐reducing benefits of CSR. These findings provide strong support for information intensity arguments.