Document Type

Article

Publication Date

1-6-2019

Abstract

This paper presents a comprehensive investigation of the CSR activities of U.S.-based firms that are labeled more compliant with Islamic law. We aim to differentiate between facts and myths with regard to the common belief that religion-compliant firms have better CSR conduct. Firms that are more compliant with Islamic law have higher overall CSR scores. However, these firms are not superior when it comes to the human rights and governance aspects of CSR. Interestingly, aside from the mechanical association with controversial aspects of CSR, firms involved in sin industries do not seem to have inferior CSR scores. We create an index to measure Islamic-compliance that overcomes several flaws in the binary measures adopted by Dow Jones, Morgan Stanley, S&P, and FTSE, among others, that are used in 131 countries to manage the multi-trillion dollar Islamic finance industry. Our empirical results show that firms that use less leverage and hoard less cash have a better and more persistent CSR score. Our findings are consistent with the insider-initiated corporate philanthropy hypothesis.

Comments

Original published version available at http://dx.doi.org/10.2139/ssrn.3305430.

Publication Title

SSRN

DOI

10.2139/ssrn.3305430

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