Do firms use CSR to insure against stock price risk?

Corporate social responsibility has many purported benefits, one of which is that it can insure against the adverse stock price effects of negative events. But do managers purposefully use CSR in this way and do such investments provide intended insurance‐like benefits? By taking advantage of a natural experiment where a randomly selected set of pilot firms were exposed to elevated short‐sale risk unleashed by the SEC regulation, we find evidence that they do. Once the SEC initiated the regulatory change, firms that faced greater risk increased CSR more than firms that did not. In addition, increased CSR lowered short interests in pilot firms’ stocks and this reduction is attributable to the insurance‐like effect of CSR rather than simply prevention of adverse events.