Can social capital and reputation mitigate political and market competition risk?

We assess whether social capital, captured by CSR, is an effective hedge against risks arising from political and market competition risk. Having a higher CSR score significantly reduces stock return volatility during political uncertainty, but not cash flow volatility. Meanwhile, CSR is also an effective hedge against stock return volatility that arises from peer competition. Finally, the hedging effect of CSR on stock return volatility is transient, but has a positive effect on firms' future performance and growth opportunities.