Corporate social responsibility and the value of cash holdings

This project studies the effect of a firm's corporate social responsibility (CSR) on the value of corporate cash holdings. Faulkender and Wang (2006) find that one additional dollar in cash holdings is associated with less than one dollar change in market value. We extend Faulkender and Wang's 2006 model by spearately including CSR disclosure and CSR performance as two additional explanatory variables and interacting change in cash holding with each of these two variables. CSR disclosure is proxied by whether a firm has a standalone CSR report in place during the year, and CSR performance is proxied by KLD social performance rating scores.