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dc.contributor.authorTZAVARA, Dionisia
dc.date.accessioned2009-06-03T13:55:25Z
dc.date.available2009-06-03T13:55:25Z
dc.date.issued2009
dc.identifier.issn1028-3625
dc.identifier.urihttp://hdl.handle.net/1814/11453
dc.description.abstractIn 1970 Milton Friedman wrote “[t]he social responsibility of business is to increase profits” (p. 122). Today there are voices advocating that engaging in CSR is in the direction of increasing profits. It is also argued that engaging in CSR helps firms alleviate some of the risks associated with the uncertain environments in which they operate. This research aims to look at the question of whether the threat of costly litigation can provide an incentive to firms to engage in CSR. We built a model where a firm and an interested party engage in litigation. The firm operates in a market and earns profits and can engage in a level of CSR which will determine the probability that damage will be caused by the firm. An interested party affected by the damage claims compensation. The firm and interested party may settle out of court or the plaintiff may bring the case to court. We assume that besides damages, the firm’s investment in CSR affects the plaintiff’s probability of winning at trial. We find that investment in CSR reduces the amount of cases brought to court and at the same time increases the probability of a case settling out of court. We also find some ambiguity regarding the effect of CSR on settlement offers with the driving forces here being on the one hand the reduction in the probability of the plaintiff winning trial and the increase in the probability of settlement and the level of court costs on the other hand. We conclude that there is incentive for firms to invest in CSR in order to avoid costly litigationen
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.relation.ispartofseriesEUI RSCASen
dc.relation.ispartofseries2009/23en
dc.relation.hasversionhttp://hdl.handle.net/1814/31138
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectCorporate Social Responsibilityen
dc.subjectLitigationen
dc.subjectSettlementen
dc.subjectIncentivesen
dc.titleCan the Threat of Costly Litigation be Incentive Enough for Companies to Engage in CSR?en
dc.typeWorking Paperen
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