Exploring the Impact of Corporate Social Responsibility Policies on Firm Value: the Case of Listed Companies in Romania

Abstract

(ProQuest: ... denotes formulae omitted.)IntroductionEach and every business evolves based on community's orientations, similar to the government being a social contract as an implicit suite of rights and obligations. However, the specifics of the contract could be changed according to the transformations within community, but generally, the contract remains the source of the business legitimacy (Donaldson, 1982). In fact, this social contract reveals the mean on which the business conduit is congruent with the aims of community. Likewise, according to Rawls (1971) and Ozar (1979), by considering the view of corporate social responsibility (hereafter CSR), the affairs are acting as a moral agent within community, the corporations reflecting and strengthening the values. Thus, the social contract, as well the moral agency, reproduces the fundamental prerequisites as regards the notion of CSR. In the sense of the Commission of the European Communities (COM, 2001, p. 366), 'corporate social responsibility is essentially a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment'. According to Crisostomo et al. (2011), CSR is related to an extensive spectrum of connections between company and various stakeholders, as well the environment. Additionally, social responsibility is considered an answer to social pressures, respectively a reply to the needs and expectations of stakeholders, concerns towards the environment, and social needs that characterize its dimensions. Moreover, corporate social performance of a certain company could be defined as 'a business organization's configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm's societal relationships' (Wood, 1991). Furthermore, according to World Commission on Environment and Development (WCED, 1987), sustainable development is viewed as 'development that meets the needs of the present, without compromising the ability of future generations to meet their own needs'. As such, Elkington (1999) considered that sustainable development of business requests the measurement against the triple bottom line of people (society), planet (ecology), as well as profit/prosperity (economy). Consequently, Gimenez et al. (2012) noted that sustainability incorporates several responsibilities such as social, environmental, and economic. Besides, Sriram et al. (2013) noticed that 'lack of social/ecological sustainability in organizations entails the risk of modern business firms becoming the dinosaurs of tomorrow'.Our paper aims to provide empirical evidence on the link between corporate social responsibility (CSR) and firm value for a sample of listed companies on the Bucharest Stock Exchange (hereafter BSE). There was developed a global index of CSR, as well as four subindices, based on a multidimensional CSR policies questionnaire, for the following social categories: social involvement; the rights, health, safety, security, and development of the employees; ensuring the quality, safety, and effectiveness of the products and services; environmental protection. Thus, the aggregate measures of CSR will be compared depending on tier of listing. In the light of the renewed EU strategy 2011-2014 for corporate social responsibility (COM, 2011, p. 681), the importance of this research is emphasized by the aim of reinforcing a high level of consumer's trust in business, respectively a significant contribution of corporations to societal well-being.1. Corporate social responsibility as driver of firm valueSchuler & Cording (2006) emphasized several theoretical models, which suggest a direct link between corporate social performance (hereafter CSP) and corporate financial performance (hereafter CFP): good management theory, stakeholder contract costs theory, private costs theory, managerial guile theory, and affordability theory. …