If a chief executive invests in corporate social responsibility it’s like an insurance policy. The chief executive is mitigating the risks in a number of areas by planning strategies around them, so the market is more lenient if the firm suffers some setback. These sorts of areas include: community involvement, corporate governance quality, workforce diversity, employee relations, environment, human rights and product quality.

For example, another study found firms with higher levels of corporate investment that were socially responsible suffer less damage to the company’s value in cases where there’s a product recall due to a defect. Being a good corporate citizen has positive spillover effects.