An Empirical Research on the Relationship Between Corporate Social Responsibility Ratings and U.S. Listed Companies’ Value

Abstract

This paper examines the relationship between corporate social responsibility (CSR) ratings and firm value, by using a sample of U.S. companies listed on the New York Stock Exchange and NASDAQ Stock Market, over 2008-2011. The Corporate Social Responsibility Index (CSRI) developed by Boston College Center for Corporate Citizenship and Reputation Institute was used as a proxy for corporate social responsibility. A certain company is perceived in three dimensions: citizenship (the community and the environment), governance (ethics and transparency), and workplace practices, that quantified through numerical variables are reflected into the CSRI ranking score. The Tobin’s Q ratio adjusted according to activity sector was employed in order to quantify firm value. After the estimation of panel data regression models, unbalanced, both without cross-sectional effects and with fixed effects, our results show that corporate social responsibility positively influences firm value. The empirical evidence is consistent with the instrumental stakeholder theory view, since the companies involved in corporate social responsibility undertakings use in a more effective way their resources in order to better satisfy stakeholders’ needs. CSR activities can add value to the firm if they are wisely managed and implemented, as well as sufficiently disclosed and reported.