Corporate Social Responsibility and Firm Performance

Abstract

A firm aims to achieve the goal of maximizing firm value by tradition. Recently, the concept of business ethics evolves into corporate social responsibility (CSR), which now has become a major issue in the business environment. The modern definition of CSR argues that a firm, as a corporate citizen, is expected not only to fulfill its economic responsibility, but also its social and environmental responsibilities. Built on this new definition, this study aims to empirically explore the relationship between CSR and firm performance from the stakeholder approach. For this research purpose, we construct a local CSR index (CSRI) based on two ideas, socially responsible investment and corporate contributions to stakeholders. Sampled the data from Taiwan Stock Exchange and Taiwan Economic Journal for the time period of 2004-2008, the CSRI is constructed on economic, social, and environmental dimensions. The main finding reveals that fulfilling CSR has a significantly positive impact on firm performance. The implication suggests that a firm could serve as a good corporate citizen, while in the meantime showing an exceptional firm performance.