Corporate Social Performance Corporate Financial Performance Research Articles

Corporate social responsibility and financial performance: Does country sustainability matter?

AbstractDrawing on stakeholder and institutional theoretical frameworks, this study aims to examine how corporate social performance (CSP) impacts corporate financial performance (CFP) and the moderating role of country sustainability and its environmental (ENV), social (SOC) and governance (GOV) dimensions. Using a broad international sample with firms from 47 countries―and through multilevel and panel data analysis―results show a positive and significant influence of CSP on CFP, while country sustainability negatively moderates the CSP–CFP relationship. This is consistent with the idea that in countries with a high level of sustainability, firms have greater difficulty obtaining competitive advantages through actions related to corporate social responsibility. Results also indicate that country sustainability has a direct and positive impact on CFP (Tobin's‐Q), regardless of CSP. Additionally, applying country sustainability in a disaggregated manner, we find that social and governance dimensions influence the CSP–CFP relationship, while the environmental dimension does not. Evidence thus confirms that the effect of CSP on CFP varies depending on the institutional context in which the firm is located.

CSR and firm profitability: Evidence from a meta‐regression analysis

AbstractWe analyze the literature on the relationship between corporate social performance (CSP) and corporate financial performance (CFP) by applying meta‐regression analysis (MRA) to 7800 results of 512 empirical studies. Our findings reveal a small positive link between CSP and CFP as well as the presence of publication bias that favors statistically significant CSP–CFP regression coefficients. We also evaluate the impact of the underlying research design on the heterogeneity in published effects using Bayesian and frequentist model‐averaging (FMA). We consider 42 contextual characteristics and our results show that reported CSP–CFP effects are smaller in cases where a binary index is used to measure CSP or when CSP is used as the dependent variable. In contrast, firms in industrial sectors or operating in China rather than the United States exhibit stronger effects. Finally, the CSP–CFP effect is driven by the choice of the econometric estimator and the inclusion of firm size as control variable.

Signaling virtue: Does firm corporate social performance trajectory moderate the social performance–financial performance relationship?

Over the past 40years, scholars have demonstrated the effects of corporate social performance (CSP) on corporate financial performance (CFP), finding mixed results on the main effect of CSP on CFP. This study moves beyond the search for a universal main effect of CSP on CFP to examine factors that drive some firms to experience greater returns from their CSP efforts. Building from the signaling and stakeholder theory definitions of reputation and the trajectory literature in psychology, this study examines the following question: what is the impact of a firm's CSP reputation on the relationship between CSP actions and CFP in the current period? Findings based on a sample of 351 US firms demonstrate that firms with either a history of growth in negative CSP, a propensity toward increasing negative CSP, or a more inconsistent history of positive or negative CSP, experience decreased returns from current period investments in CSP.

Reporting Biases in Empirical Management Research: The Example of Win-Win Corporate Social Responsibility

Reporting biases refer to a truncated pool of published studies with the resulting suppression or omission of some empirical findings. Such biases can occur in positive research paradigms that try to uncover correlations and causal relationships in the social world by using the empirical methods of (natural) science. Furthermore, reporting biases can come about because of authors who do not write papers that report unfavorable results despite strong efforts made to find previously accepted evidence and because of a higher rejection rate of studies documenting contradictory evidence. Reporting biases are a serious concern because the conclusions of systematic reviews and meta-analyses can be misleading. The authors show that published evidence in win-win corporate social responsibility (CSR) research tends to overestimate efficiency. The research field expects to find a positive association between corporate social performance (CSP) and corporate financial performance (CFP), and findings meet that expectation. The authors explain how this pattern may reflect reporting bias. The empirical results show strong tentative evidence for a positive reporting bias in the CSP–CFP literature but only weak tentative evidence for CSP efficiency. The study also examines which factors, such as time trends, publication outlet, and study characteristics, are associated with higher reporting biases within this literature.

Corporate social performance: why it matters? Case of Taiwan

Purpose– The objective of this article is to explore the relationship between corporate social performance (CSP) and corporate financial performance (CFP) of firms in Taiwan, as the empirical evidence of Taiwan firms is scarce.Design/methodology/approach– This paper studies the empirical relation between CSP and CFP using a sample of 71 Taiwan-based companies during 2005-2011. CSP data are a composite of two Taiwan’s CSP ratings, and CFP data are retrieved fromTaiwan Economic Journaldatabase. Two control variables, R&D investment (R&D) and industry type (IND), are included in our models. The multiple regression is used as a statistical analysis tool.Findings– Our findings indicate a significantly positive CSP–CFP relationship of firms in Taiwan. Furthermore, our study reveals that the CSP in the non-manufacturing sector is more highly related with CFP than the case in the manufacturing sector in Taiwan.Originality/value– First, Our findings are consistent with the majority of recent research and are supported by the stakeholder theory. The paper argues that Taiwan firms should incorporate CSP into their business strategies for improving their competitive advantages. Second, our findings argue that Taiwan firms in the manufacturing sector should learn the best CSP practices from firms in the non-manufacturing sector to maintain and enhance their sustainability. Third, this paper extends the subject study of Taiwan scenario, and it is the first paper combining two CSP local ratings as the proxy for the CSP measure.

A decade's debate on the nexus between corporate social and corporate financial performance: a critical review of empirical studies 2002–2011

Abstract Theoretical discussions and empirical studies on the nexus between corporate social responsibility/corporate social performance and corporate financial performance have never ceased since the origin of the concepts. The development trajectories of such studies should be articulated with a view to informing practical corporate social responsibility applications and theoretical studies in the future. This paper presents a critical review of relevant empirical research articles on the nexus between corporate social performance and corporate financial performance published during the ten-year period from 2002 to 2011. Using mixed-methods of content analyses and statistical analyses, the paper reviews 84 empirical studies of this kind published during the period. The results indicate that, despite the enormous amount of previous studies, the corporate social performance and corporate financial performance nexus is a line of inquiry that remains inconclusive. The pattern of corporate social performance-corporate financial performance relationship research in the decade examined has shifted towards exploring the linkages between specific aspects of the two constructs. The positive relationships between these specific aspects in dual directions are confirmed by most of the studies examined in this paper. The paper also examines the impact of time and space change on the corporate social performance-corporate financial performance nexus. The findings show that researchers have gradually recognized that the relationship is not static but changes over time. Furthermore, the paper finds that corporate social responsibility has been increasingly debated in developing countries and in specified industrial settings. The review concludes that to explore the corporate social performance-corporate financial performance nexus by contextualizing it in a specified community, and/or examine its dynamics is a promising research area that can yield significant academic and practical values.

Translating corporate social performance into financial performance: exploring the moderating role of high-performance work practices

The purpose of this study is to examine the role of high-performance work practices (HPWPs) in helping to translate corporate social performance (CSP) into corporate financial performance (CFP). We employ arguments from the behavioral view of human resource management to highlight the vertical connection between a firm's proclivity for CSP and the management practices it adopts. Furthermore, we examine the moderating influence of HPWPs on the CSP–CFP linkage. Results suggest that HPWPs moderate the relationship between CSP and financial outcomes, and suggest that human resource practices may play an important role in enhancing a positive CSP–CFP relationship by helping to vertically align the behaviors of employees with the values and orientation of the organization.

The relationship between corporate social performance and corporate financial performance and the role of innovation: evidence from German listed firms

Corporate social performance (CSP) has become increasingly important in recent years, primarily because of growing stakeholder requirements regarding a firm’s environmental and social concerns. Satisfying stakeholder expectations and needs through transparent corporate activities may actually improve a firm’s reputation and financial results. With an empirical study of the CSP disclosures of large German listed firms, we tested the hypothesized causal relationship between CSP and corporate financial performance (CFP). We measure CSP as an equal weighted CSP-Index based on Global Reporting Initiative’s social and environmental core key performance indicators. CFP is measured by return on assets. Based on correlation and regression analyses, we find support for a positive and significant interaction between CSP and CFP for large German listed firms. Our findings indicate that the CSP–CFP relationship is affected by the degree of innovation. Furthermore, there is evidence for a unidirectional Granger causal relationship running from CFPt-1 to CSPt. Thus, firms with superior CFP may use their surplus of monetary or non-monetary resources for further improvements of their CSP.

Strategic versus Ad-hoc Corporate Social Performance: An Analysis of CSP Maturity and Its Relationship to Corporate Financial Performance

This paper extends empirical research that examines the Corporate Social Performance (CSP)-Corporate Financial Performance (CFP) relationship. Previous studies display mixed findings with no unified evidence regarding the CSP-CFP relationship’s direction or impact. We introduce the concepts of strategic CSP and ad-hoc CSP, which we collectively term “CSP maturity.” Using panel data on 86 large European banks and insurance companies, we investigate whether there is a relationship between a company’s financial performance (CFP) and CSP maturity and, if a relationship is present, its direction and causality. Correlation analysis suggests CSP maturity and CFP are negatively related to one another; independent sample t-tests show statistically significant different means of ROA and ROS for companies engaged in strategic and ad-hoc CSP. Ad-hoc companies were on average associated with better ROA and ROS. No significant difference was present for ROE. In contrast, regression analysis did not show a relationship between CSP maturity and CFP, suggesting CSP maturity does not have an impact on CFP nor can CFP be used to explain CSP maturity. The results of this study may be limited in their generalizations because the data includes 2007-2008; a period of time the global economy experienced a major recession.

Corporate Social and Financial Performance Re-Examined: Industry Effects in a Linear Mixed Model Analysis

In this research, we shed new light on the empirical link between corporate social performance (CSP) and corporate financial performance (CFP) via the application of empirical models and methods new to the CSP–CFP literature. Applying advanced financial models to a uniquely constructed panel dataset, we demonstrate that a significant overall CSP–CFP relationship exists and that this relationship is, in part, conditioned on firms’ industry-specific context. To accommodate the estimation of time-invariant industry and industry-interaction effects, we estimate linear mixed models in our test of the CSP–CFP relationship. Our results show both a significant overall CSP effect as well as significant industry effects between CSP and CFP. In conflict with expectations, the unweighted average effect of CSP on CFP is negative. Our industry analysis, however, shows that in over 17% of the industries in our sample, the effect of CSP on CFP for socially responsible firms is positive. We also examine the multidimensional nature of the CSP construct in an industry context by exploring the CSP dimension–industry nexus and identify dimensions of social performance that are associated with either better or worse financial performance. Our results confirm the existence of disparate CSP dimension–industry effects on CFP, thus our results provide important and actionable information to decision makers considering whether and how to commit corporate resources to social performance.

Deconstructing the Relationship Between Corporate Social and Financial Performance

For four decades, research on the role and responsibilities of business in society has centered on the business case for corporate social responsibility (CSR) and an increasing number of studies on the corporate social performance (CSP)—corporate financial performance (CFP) link emerged leading to controversial results. Heeding the call for a deeper understanding of the mechanisms linking certain CSR efforts to certain performance outcomes, this study provides a stakeholder-based organizing framework rooted in an extensive review of existing literature on the link between CSP and CFP. In so doing, we aim at guiding research and practice toward less simplistic understandings of the CSP–CFP connection, thus advancing the debate over the consequences of voluntary integrating CSR into business operations and into relationships with stakeholders. By disentangling specific drivers and outcomes of the CSP–CFP link, we underline the importance of setting clear boundaries and specifying levels of analysis to generate comparable results.

Corporate financial performance and corporate social performance: an update and reinvestigation

AbstractFor some time, researchers have been investigating the relationship between a firm's corporate financial performance (CFP) and its corporate social performance (CSP). Although most studies indicate that CSP is a determinant of CFP, other aspects of this research have been inconsistent. Some studies are criticized for using unreliable CSP measures; others for missing control variables; and still others for assuming linearity without valid testing. This paper responds to these issues with an updated study of the CSP–CFP relationship, testing two approaches to measuring CSP, controlling for key variables identified in the literature, and testing for nonlinearity of certain independent variables. Chief among our findings is a positive CSP–CFP relationship, which supports proponents of stakeholder theory. We also determine that empirical models specifying two CSP component measures are stronger than those using a fully aggregated measure. Lastly, we find that control variables must be properly specified to avoid bias and that some of these measures are quadratically related to CFP. Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment.

Toward a Unified Theory of the CSP–CFP Link

This article proposes a unified theory of the relationship between corporate social performance (CSP) and corporate financial performance (CFP). The theory provides a framework for rationalizing the various and contradictory findings in past empirical research. The theory is based on the parallels between the business and CSR domains, and thus draws on models from economics.

A Corporate Social Performance–Corporate Financial Performance Behavioral Model for Consumers

We present a model linking corporate social performance (CSP) and corporate financial performance (CFP). Our CSP–CFP behavioral model for consumers examines the roles of information intensity and moral values in linking CSP with purchase behavior. We predict information intensity will influence the consumer's brand attitude, and we expect consumer moral values to have a main effect on purchase intentions, as well as to interact with information intensity in predicting purchase intentions.