**2. Corporate social irresponsibility also matters**

Recently, research on firm performance and corporate social performance (CSP) has broadened to concurrently evaluate corporate social irresponsibility (CSI) with corporate social responsibility (CSR) [21].

A company's corporate social performance (CSP) includes both the good side through corporate social responsibility (CSR) initiatives and the negative side through corporate social irresponsibility (CSI) incidents [21].

CSR has been widely acknowledged as a highly desired firm action that not only benefits communities but also helps firms achieve better firms value [22, 23].

Until recently, researchers have begun to expand their understanding of the impact of CSR activities on firms' value by including CSI, as an opposing counterpart [11, 24].

Therefore, some companies promote CSR, others have little or no engagement in CSR, and other companies focus on avoiding CSI to avoid any harm [25].

Recently, corporate environmental responsibility (CER) has attracted great managerial and social attention [9] and it's been the center of interest to many researchers alike [26–29].

CER includes corporate practices related to managing and using natural resources, production activities, disposing of waste, environmentally friendly products, recycling, and pollution prevention and control [30]. In other words, CER is referring to how companies undertake their responsibility to minimize and manage the negative impact of their operations and activities on the environment [31, 32].

In the following, we aim to investigate the effect of the environmental dimension of CSR on firms' value, and whether firms' can manage potential environmental exposures by engaging in environmental activities to overcome the misconduct and harm made and enhance their economic value.

#### **2.1 What does CSI refer to?**

According to previous researchers, corporate social irresponsibility or misconduct is understood to describe corporate behavior that reasonable stakeholders consider irresponsible. It is related to whether the company conducts harmful activities that benefit a few but causes substantial net harm to other stakeholders [33].

Therefore, companies found to be involved in CSI may have serious dangerous consequences for the environment, employees, communities, and other social entities [34].

Corporate misbehavior does not seem to generate positive implications for the firm. Research has shown that consumers are now more aware of environmental issues [35]. When consumers become aware of socially irresponsible behavior, their positive identification of the company is interrupted. Since consumers are no longer interested in the company or no longer buying products [36], their identities become negative [36], resulting in a loss of income. This negative perception of the firm may likewise harm its reputation and brand [37].

CSI may additionally undermine the environmental supportiveness of stakeholders due to the fact that the CSI can endanger communities, as in the case of BP's oil spill. Environmental supportiveness is vital for first-rate corporation performance, and if lost, can lead to increased pressures in handling relationships with the community, public, government, or other social groups [38].

This pressure may eventually be transferred to channel members, partners, and agencies within the business network [39].

Unfortunately, due to the negative effects of corporate misconduct, the ability of the firm to attain high incomes will be reduced like its shareholder's value.

Accordingly, stakeholder theory conceptualizes CSI as a contradictory force to CSR that causes negative stakeholder perceptions and connections and leads to negative firm consequences in the form of costly lawsuits, costs related to negative firm reputation, sales revenue losses, increased capital costs, and increased financial risk [35, 40].

Otherwise, the corporate social performance also initiates social responsibility that interacts with social and environmental concerns to overcome the harm made [41].

In the interest of managing the firm's reputation, companies can focus on their environmental, community, and social responsibility to highlight their ethical, social, and environmental performance [42].

Fombrun [43] emphasized that corporate reputation brings tangible benefits to the organization, such as greater product prices, lower capital and labor costs, and increased employee loyalty. Similarly, Fombrun and Van Riel [43], according to previous studies, declared that "a corporate reputation is a collective representation of a firm's past actions and results that describes a firm's ability to deliver valued outcomes to multiple stakeholders." We can assume that reputation provides organizations with multiple strategic advantages.

Therefore, stakeholder theory suggests that CSR strategies enhance shareholder value through improving stakeholder relationships [44], thereby harmonizing corporate environmental responsibilities with value-maximization goals [45] and generating a favorable firm image [46, 47]. However, prior research has produced mixed evidence on the relationship between CSR and firm value [48].

On the one hand, relevant CSR has been associated with higher market valuation [13, 49], higher returns rating from investment activities [14], easier access to financing [50], and lower cost of capital [51–53].

On the other hand, other researchers have found that firm valuation has not improved [54] or it has been related to lower financial performance [17, 55]. In addition, Lys, Naughton, and Wang [56] argued that CSR does not cause superior firm financial performance; on the contrary, firms that expect finer future performance signal their expectations by improving their CSR engagements.

Moreover, consistent with the view that CSR constitutes a form of agency problem, previous studies have linked CSR policies to executive narcissism [56], political ideology [17, 18, 57], and lower manager–shareholder interest alignment [58]. Overall, the empirical evidence on the economic value of following CSR is far from conclusive [10, 12, 54].

From the perspective of environmental CSR, previous researchers documented a negative market reaction to environmental misconduct and infractions [3]. Some studies propose that environmental initiatives increase firms' financial performance [11], whereas other studies have found that the impact of sustainability priorities on company performance is either neutral [59, 60] or negative [61].

In the same line, Karpoff, Lott, and Wehrly [3] assumed that firms pay substantial legal penalties and suffer corresponding market value losses following violations of environmental regulations. Consequently, investments that reduce toxic firms' exposure to the risk of losses arising from environmental accidents, lawsuits, and fines can create value for all shareholders by lowering expected costs of financial distress, financing costs, and underinvestment [62, 63].

Hence, scholars shed light that reputational capital could enable a firm to avoid consumer boycotts knowing that customers are now more aware of environmental issues [38] and access capital from green investors [51, 64].

According to Godfrey [65] and from a competitive perspective, CSR provides an "insurance-like protection" against negative shocks caused by corporate social irresponsibility (CSI), by taking advantage of the goodwill of stakeholder groups [15, 66].

For example, Hong and Liskovich [67] found that firms with better CSR engagements incur more lenient financial penalties for bribing foreign officials than firms with poor CSR.
