The role of corporate governance and transparency in the generation of financial performance in socially responsible companies

Abstract

ABSTRACTSocially responsible companies develop strategies based on ESG criteria. Literature and agents operating in the markets are concerned about knowing whether the Corporate Social Responsibility (CSR) and Corporate Governance (CG) practices have a positive impact on financial performance. Main studies indicate that good CG practices are associated with a commitment to transparency. Our aim is to analyse the impact that CSR disclosure, as a transparency mechanism, and good CG practices have on the financial performance of socially responsible companies. To this aim, a system of simultaneous equations is proposed, in which the CSR disclosure variable has a mediating role, acting as liaison between the CG adopted by the organisation and the financial valuation. The results indicate that companies who wish to rise funding on the financial markets should develop both: a good CG and a high level of CSR disclosure, as part of their CSR strategy.