Abstract
This study investigates the relation between individual dimensions of corporate social responsibility (CSR) and financial performance in different industries. Using Kinder, Lydenberg and Domini (KLD) social ratings, we find that investors seem to be more sensitive to the dimension “Environment” in mining and manufacturing sectors while they seem to be more sensitive to the dimension “Employees’ welfare” in the service industry. Our results also suggest that investors perceive an additional financial risk from firm’s irresponsible behavior and consequently, they are more pre-occupied by eventual losses caused by firms’ social irresponsibility than by potential financial gains from corporate social performance.
Highlights
Corporate social responsibility (CSR) has become an important practice among corporations in recent years and a large number of institutional investors are showing a preference for investing in companies who consider social issues in their activities (El Ghoul et al, 2011; Guenster et al, 2010)
We examine the impact of the internet crisis and the credit crisis on the relation social-financial performance using 2 dummy variables: Ri,t − R f,t =αi + βi,1 (Rm,t − R f,t ) + βi,2 SMBt + βi,3 HMLt + βi,4 PY1YRt + βi,5 D1,t + βi,6 D2,t + εi,t where the first four factors are the same as in the prior model and the factors D1,t and D2,t are dummy variables that will be equal to 1 for the period of internet and credit crises and 0 otherwise
This paper investigates the relation between individual dimensions of corporate social responsibility and financial performance in different industries
Summary
Corporate social responsibility (CSR) has become an important practice among corporations in recent years and a large number of institutional investors are showing a preference for investing in companies who consider social issues in their activities (El Ghoul et al, 2011; Guenster et al, 2010). The rise of socially responsible practices has made corporate social performance (CSP) a popular field of study, but so far, empirical research has produced mixed results with regard to the relation social- financial performance (Shalchian et al, 2012). Jones and Murrell (2001) and Derwall et al (2005) consider CSP as a one-dimensional concept comprising only one aspect of corporate social performance such as environment or employees’ welfare, whereas it is considered as a multi-dimensional concept when measured by Waddock and Graves (1997), Shalchian et al (2012), and Bouslah et al (2013)
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