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Social Responsibility and Firm's Objectives

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Michele Fioretti

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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Dates and versions

hal-03393065 , version 1 (21-10-2021)
hal-03393065 , version 2 (29-09-2022)

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Attribution - NoDerivatives - CC BY 4.0

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Michele Fioretti. Social Responsibility and Firm's Objectives. 2020. ⟨hal-03393065v1⟩
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