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Social Responsibility and Firm's Objectives

Abstract : This paper shows that firms’ objectives can extend beyond profit maximization. I focus on a for-profit firm that offers charity auctions of celebrities’ belongings. The firm’s donations affect both revenues and costs. Counterfactuals from a structural model comparing the actual donations with the profit-maximizing benchmark indicate that the firm donates beyond profit-maximization. Linking this result to a change in the capital structure, I demonstrate that the firm’s objectives include both profits and donations. I also estimate a modest increase in consumers’ willingness to pay due to donations, suggesting that demand cannot explain firms’ investments in social responsibility.
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Preprints, Working Papers, ...
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Submitted on : Thursday, October 21, 2021 - 9:32:21 PM
Last modification on : Monday, March 21, 2022 - 2:47:48 PM
Long-term archiving on: : Saturday, January 22, 2022 - 9:08:09 PM


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Michele Fioretti. Social Responsibility and Firm's Objectives. 2020. ⟨hal-03393065⟩



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