This paper shows that corporate social responsibility (CSR) and firm value are positively related for firms with high customer awareness, as proxied by advertising expenditures. For firms with low customer awareness, the relation is either negative or insignificant. In addition, we find that the effect of awareness on the CSR–value relation is reversed for firms with a poor prior reputation as corporate citizens. This evidence is consistent with the view that CSR activities can add value to the firm but only under certain conditions.

Key words: corporate social responsibiliy; firm value; customer awareness; reputation
History: Received September 21, 2009; accepted June 13, 2012, by Bruno Cassiman, business strategy.


1. Introduction

2. CSR, Advertising Intensity, and Firm Value
  2.1.  Defining CSR
  2.2. Customer Awareness and CSR
  2.3. CSR as a Signal of Product Quality

3. Data and Variable Construction

4. Results
  4.1. Does Advertising Increase Awareness of CSR Activities?
  4.2. Advertising Intensity and the Value of CSR Activities
  4.3. Why Does Advertising Intensity Matter?
  4.4. Robustness Tests
  4.5. The Impact of the Firm’s Reputation

5. Discussion and Conclusion

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Published online in Articles in Advance January 8, 2013.

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