Corporate Social Responsibility as a Risk Management Strategy in the U.S. Restaurant Industry

Over the past decades, numerous studies have been conducted on the effects of corporate social responsibility (CSR) on firm performance; however only a few explored potential effects of CSR on a firm’s various risks. The purpose of this study is to investigate the relationship between a firm’s investment in CSR and three risk measures: total, upside, and downside risk in the U.S. restaurant context. The current study considers two sub-dimensions of CSR in relation to restaurant firms’ risks; positive CSR (PCSR), represents socially responsible practices while negative CSR (NCSR) represents socially irresponsible practices. Findings from this study support perspectives on CSR not only as an effective strategy for risk management that lowers overall risk, but also as an option or insurance-like protection that specifically reduces downside risk within the restaurant context. Given the risky nature of the restaurant industry (i.e., highly sensitive to economic conditions), findings from this study will benefit managers and executives of the restaurant firms when developing or revising their business strategies.