Does CSR Reduce Idiosyncratic Risk? Roles of Operational Efficiency and AI Innovation

• DOI: 10.1111/poms.13483
• Publication Date: 2021-05-29T18:04:46Z
• Authors: Guo Li; Na Li; Suresh P. Sethi
• Keywords: Endogeneity; Systematic risk; Affect

In the context of Industry 4.0, corporate social responsibility (CSR) plays an increasingly important role in firm risk management. To mitigate and improve operational productivity, artificial intelligence (AI), a key disruptive technology, has been employed many industries. this study, we examine relationship between CSR idiosyncratic (IR) as moderated by AI innovation efficiency based on data from 1614 firms China during period 2010 to 2017. The empirical results show that can negatively affect IR, while beyond certain level, it acts opposite direction, exhibiting U‐shaped relationship. particular, shifts turning point curve right, implying with high obtain higher optimal benefit improving their CSR. Furthermore, flattens curve, thereby weakening CSR's positive impact IR. This result indicates is not always beneficial. As have some substitution effect CSR, enterprises should focus either or main differentiation strategy maximize utilization resources. We further instrument using expenditure ratio province where headquartered address potential endogeneity concern. Finally, provide several prominent managerial implications for enterprises, governments, investors.