Financial Performance of Socially Responsible Firms: The Short- and Long-Term Impact

Maria Charlo,Ana Muñoz,Ismael Moya

doi:10.3390/su9091622

Abstract

The pressure of society for firms to adopt socially responsible behavior is evident. Yet, Corporate Social Responsibility (CSR) needs an economic justification. In response to this, there exists a comprehensive literature that analyzes the possible relation between social and business financial performance. During the last decade, the literature has been heading toward the carrying out of dynamic studies as researches find that the relationship between social and financial performance is not static. The purpose of this work is to analyze the relevance for the financial performance of Spanish listed firms of maintaining their responsible behavior. To do so, we carry out a comparison between two analyses—one cross-sectional, and the other longitudinal—to be able to conclude whether or not adopting responsible criteria makes a difference in business financial performance in the short and long-term. Some of the results obtained in the cross-sectional study are consolidated in the long-term study. In this sense, responsible firms exhibit a higher systematic risk and have greater size. As a conclusion, be responsible does not mean less stock profitability or a lower business result. It certainly contributes to firms continuing to voluntarily incorporate good corporate social responsibility practices into their business models. What is more, these results support the governmental policies and initiatives that bolster corporate social responsibility.

Highlights

The possible nexus between corporate social responsibility (CSR) and financial performance continues being the cause of a continuous debate [1]
Responding to the need for more research in the Spanish area and avoiding the use of single and hardly homogenous measures, we study the firms that belong to the sole Spanish responsible index: the FTSE4Good IBEX
We considered as responsible firms the 32 that belonged to the FTSE4Good IBEX in November 2008

Summary

Introduction

The possible nexus between corporate social responsibility (CSR) and financial performance continues being the cause of a continuous debate [1]. Responding to the need for more research in the Spanish area and avoiding the use of single and hardly homogenous measures, we study the firms that belong to the sole Spanish responsible index: the FTSE4Good IBEX. It is a multidimensional indicator of responsible behavior whose criteria are made public at an international level. This is why, for the purposes of this work, firms that belong to the Spanish responsible index are considered socially responsible. Firms that belong to this responsible index on an ongoing basis are credited with a better CSR management than those that have never been in the index

Objectives

Findings

Discussion

Conclusion