Building on earlier work on the relationship between corporate social performance (CSP) and a firm’s financial performance, this integrative empirical study supports the theoretical argument that the higher a firm’s CSP the lower its financial risk. Specifically, the relationship between CSP and risk appears to be one of reciprocal causality, because prior CSP is negatively related to subsequent financial risk, and prior financial risk is negatively related to subsequent CSP. Additionally, CSP is more strongly correlated with measures of market risk (...) than measures of accounting risk. Of all CSP measures, reputation for social responsibility appears to be the most important one in terms of its risk implications. (shrink)

The contribution of this work is a classification of corporate social action underlying the Social Ratings Data compiled by Kinder Lydenburg Domini Analytics, Inc. We compare extant typologies of corporate social action to the results of our exploratory factor analysis. Our findings indicate four distinct latent constructs that bear resemblance to concepts discussed in prior literature. Akey finding of our research is that positive and negative social action are both empirically and conceptually distinct constructs and should not be combined in (...) future research. Additionally, we recommend that some prior research results be reconsidered to determine whether these newly derived measures might clarify some previous findings. (shrink)

This paper argues that research on the business case for corporate social responsibility (CSR) must account for the path dependent nature of firm-stakeholderrelations, and develops the construct of stakeholder influence capacity (SIC) to fill this void. SIC helps to explain why the effects of CSR on corporate financial performance (CFP) vary across firms and across time, therein providing a missing link in the study of the business case. This paper distinguishes CSR from related and confounded corporate resource allocations and from (...) corporate social performance (CSP), then incorporates SIC into a model that explains how acts of CSR are transformed into CFP through stakeholder relationships. This paper also develops a set of propositions to aid future research on the contingencies that produce variable financial returns to investments in CSR. (shrink)

This study investigates the effects of internal and external corporate governance and monitoring mechanisms on the choice of corporate social responsibility (CSR) engagement and the value of firms engaging in CSR activities. The study finds the CSR choice is positively associated with the internal and external corporate governance and monitoring mechanisms, including board leadership, board independence, institutional ownership, analyst following, and anti- takeover provisions, after controlling for various firm characteristics. After correcting for endogeneity and simultaneity issues, the results show that (...) CSR engagement positively influences firm value measured by industry-adjusted Tobin’s q. We find that the impact of analyst following for firms that engage in CSR on firm value is strongly positive, while the board leadership, board independence, blockholders’ ownership, and institutional ownership play a relatively weaker role in enhancing firm value. Furthermore, we find that CSR activities that address internal social enhancement within the firm, such as employees diversity, firm relationship with its employees, and product quality, enhance the value of firm more than other CSR subcategories for broader external social enhancement such as community relation and environmental concerns. (shrink)

This study investigates the market reaction to corporate press releases announcing donations to the relief effort following the December, 2004 tsunami in Southeast Asia. Based on a sample of 79 U.S. companies, results indicate a statistically significant positive 5-day cumulative abnormal return. While differences in the timing of the press releases do not appear to have influenced market reactions, the amount of the donations did. Overall, the results appear to support Godfrey’s (Academy of Management Review 30, 777–798; 2005) assertion that (...) philanthropic giving must be perceived as being a genuine manifestation of the firm’s underlying social responsiveness in order to increase firm value. (shrink)

In this article, we empirically assess the impact of corporate ethical identity (CEI) on a firm's financial performance. Drawing on formulations of normative and instrumental stakeholder theory, we argue that firms with a strong ethical identity achieve a greater degree of stakeholder satisfaction (SS), which, in turn, positively influences a firm's financial performance. We analyze two dimensions of the CEI of firms: corporate revealed ethics and corporate applied ethics. Our results indicate that revealed ethics has informational worth and enhances shareholder (...) value, whereas applied ethics has a positive impact through the improvement of SS. However, revealed ethics by itself (i.e. decoupled from ethical initiatives) is not sufficient to boost economic performance. (shrink)

The empirical relationship between a firm’s social performance and its financial performance is still not well established in the literature. Despite more than 30 years of research and more than 100 empirical studies on the issue, the results are still mixed. We argue that the heterogeneous results found in previous studies are not due exclusively to problems related with the measurement instruments or the samples used. Instead, we posit that a more fundamental problem related with the endogeneity of social strategic (...) decisions could be driving most of the empirical findings. We show that, using a panel data of 658 firms from 1991 to 2005, how some of the results found in previous research change, and some are even reversed when endogeneity is properly taken into account. (shrink)

Several researchers have suggested that a talented, quality workforce will become a more important source of competitive advantage for firms in the future. Drawing on social identity theory and signaling theory, the authors hypothesize that firms can use their corporate social performance (CSP) activities to attract job applicants. Specifically, signaling theory suggests that a firm’s CSP sends signals to prospective job applicants about what it would be like to work for a firm. Social identity theory suggests that job applicants have (...) higher self-images whenworking for socially responsive firms over their less responsive counterparts. The authors conducted an experiment in which they manipulated CSP and found that prospective job applicants are more likely to pursue jobs from socially responsible firms than from firms with poor social performance reputations. The implications of these findings for academicians and practitioners alike are discussed. (shrink)

This study assesses the causal relationship between corporate social performance (CSP) and financial performance (FP). We perform our empirical analyses on a sample of 179 publicly held Canadian firms and use the measures of CSP provided by Canadian Social Investment Database for the years 2004 and 2005. Using the “Granger causality” approach, we find no significant relationship between a composite measure of a firm’s CSP and FP, except for market returns. However, using individual measures of CSP, we find a robust (...) significant negative impact of the environmental dimension of CSP and three measures of FP, namely return on assets, return on equity, and market returns. This latter finding is consistent, at least in the short run, with the trade-off hypothesis and, in part, with the negative synergy hypothesis which states that socially responsible firms experience lower profits and reduced shareholder wealth, which in turn limits the socially responsible investments. (shrink)

Building on existing studies suggesting that corporate social performance (CSP) is important in the job choice process, the authors investigate job seekers’perceptions of importance of CSP and explore effects of CSP dimensions on organizational attractiveness. Job seekers consider CSP important to assessment of firms and rate five specific CSP dimensions (environment, community relations, employee relations, diversity, and product issues) as more important than six other CSP dimensions. Using signaling theory and social identity theory, the authors hypothesize differences in effects of (...) CSP data on ratings of employer attractiveness and find that environment, community relations, and diversity dimensions have the largest affect on attractiveness ratings. (shrink)

In this article, we examine the effect of corporate social responsibility (CSR) on firms' financial performance (CSR-effect). Two competing hypotheses, social impact hypothesis and shift of focus hypothesis, are proposed to investigate this issue, where the former suggests that CSR has a positive relation with performance and the latter are opposite. In order to ensure the CSR-effect is not contaminated by other faeton or samples are randomly drawn, we employ four matching methods, Nearest, Caliper, Mahala and Mahala Caliper to match (...) the samples of CSR (CSR-firms) and without CSR (NonCSR-firms) with similar characteristics. Although four methods yield slightly different results, firms engaging in CSR activities tend to obtain significantly higher values on pretax income to net sales and profit margin, and adopting CSR at the very least not deteriorate the performance of firms, making our con clusion favors the social impact hypothesis and against shift of focus hypothesis in Taiwan. Thus, ambition and conscience are not conflicting with each other. (shrink)

This study examines the relationships between a company''s emphasis on discretionary social responsibility, environment, and firm performance. It tests the proposition that environmental munificence and dynamism moderate the relationship between discretionary social responsibility and financial performance. Social responsibility was measured with a three-item scale in a sample of 62 firms using a questionnaire. Environmental munificence and dynamism were measured using archival sources as was financial performance (return on assets and return on sales). The results of moderated regression analyses and subgroup (...) analyses found a significant moderating effect of environment on the social responsibility-firm performance relationship. Discretionary social responsibility contributes to firm performance in environments that are dynamic and munificent. (shrink)

Although agreement on the positive sign of the relationship between corporate social and financial performance is observed in the literature, the mechanisms that constitute this relationship are not yet well-known. We address this issue by extending management’s stakeholder theory by adding insights from psychology’s prospect decision theory and sociology’s resource dependence theory. Empirically, we analyze an extensive panel dataset, including information on disaggregated measures of social performance for the S&P 500 in the 1997–2002 period. In so doing, we enrich the (...) extant literature by focusing on stakeholder heterogeneity, perceptional framing, and disaggregated measures of corporate social performance. (shrink)

This study utilizes structural equation modeling (SEM) to explore the positive effect of corporate environmental ethics on competitive advantage in the Taiwanese manufacturing industry via the mediator: green innovation performance. This study divides green innovation into green product innovation and green process innovation. The empirical results show that corporate environmental ethics positively affects green product innovation and green process innovation. In addition, this study verifies that green product innovation mediates the positive relationship between corporate environmental ethics and competitive advantage, but (...) green process innovation does not. Therefore, corporate environmental ethics can not only affect competitive advantage directly, but also influence it indirectly via green product innovation in the Taiwanese manufacturing industry. Taiwanese manufacturing companies can increase their corporate environmental ethics and green product innovation to enhance their competitive advantages. (shrink)

Since the 1970s, many Anglo-American studies have investigated the theme of corporate social responsibility (CSR) and its costs and benefits. Most studies have tried to test, largely in samples of multiple industries, the relationship between corporate social performance (CSP) and corporate financial performance (CFP). These analyses, however, have produced conflicting results and any attempt to give a generalized and coherent conclusion has proved inadequate. This article examines the ways CSP can be proxied and investigates the possible relationship between CSP (measured (...) by ethical rating) and CFP (measured by market and accounting ratios) in the banking sector using correlation methodology. It emerges that there is no statistically significant link between CSP and CFP. (shrink)

This article argues that corporate social responsibility may contribute to product differentiation in export markets and thus improve export performance. We test this argument by observing a period of decreasing export competitiveness in a leading emerging economy. Using a large-scale survey design with 252 questionnaires completed by mediumand large-sized Brazilian exporters, we used structural equations modelling to test our hypotheses. The results suggest that CSR product differentiation predicts export performance better than product quality differentiation and almost as well as product (...) innovation differentiation. Multi- group analysis further revealed that the positive and significant effect of CSR product differentiation on export performance is likely to be contingent on the number and type of countries that are targeted. Our study contributes to the literature on CSR and export performance by developing and empirically validating a model that explains under which conditions CSR-based product differentiation may lead to improved export performance. (shrink)

This article argues that corporate social responsibility (CSR) may contribute to product differentiation in export markets and thus improve export performance. We test this argument by observing a period of decreasing export competitiveness in a leading emerging economy (Brazil). Using a large-scale survey design with 252 questionnaires completed by medium- and large-sized Brazilian exporters, we used structural equations modelling to test our hypotheses. The results suggest that CSR product differentiation predicts export performance better than product quality differentiation and almost as (...) well as product innovation differentiation. Multi-group analysis further revealed that the positive and significant effect of CSR product differentiation on export performance is likely to be contingent on the number and type (developing vs. developed) of countries that are targeted. Our study contributes to the literature on CSR and export performance by developing and empirically validating a model that explains under which conditions CSR-based product differentiation may lead to improved export performance. (shrink)

This article examines the concurrent validity of the Kinder, Lydenberg, Domini Research & Analytics corporate social performance measures. Because KLD changed its evaluation methods to richer approaches, a new look at the concurrent validity of the indicators is necessary. To do this new look, the authors examine the new “Binary” and “Continuous” versions of the KLD and compare them with previous versions of KLD. The results suggest that the continuous scores provide better measurement characteristics than do the binary version. Overall, (...) the new versions of the KLD data demonstrate concurrent validity with the original version. (shrink)

This study examines whether corporate social responsibility (CSR) towards primary stakeholders influences the financial and the non-financial performance (NFP) of Indian firms. Perceptual data on CSR and NFP were collected from 150 senior-level Indian managers including CEOs through questionnaire survey.Hard data on financial performance (FP) of the companies were obtained from secondary sources. A questionnaire for assessing CSR was developed with respect to six stakeholder groups - employees, customers, investors, community, natural environment, and suppliers. A composite measure of CSR was (...) obtained by aggregating the six dimensions. Findings indicate that stock-listed firms show responsible business practices and better FP than the non-stock-listed firms. Controlling confounding effects of stock-listing, ownership, and firm size, a favorable perception of managers towards CSR is found to be associated with increase in FP and NFP of firms.Such findings hold good when CSR is assessed for the six stakeholder groups in aggregate and for each stakeholder group in segregate. Findings suggest that responsible business practices towards primary stakeholders can be profitable and beneficial to Indian firms. (shrink)

This paper analyzes the determinants of corporate reputation within a sample of large UK companies drawn from a diverse range of industries. We pay particular attention to the role that philanthropic expenditures and policies may play in shaping the perceptions of companies among their stakeholders. Our findings highlight that companies which make higher levels of philanthropic expenditures have better reputations and that this effect varies significantly across industries. Given that reputational indices tend to reflect the financial performance of organizations above (...) other factors (Fryxell, G. E. and J. Wang: 1994, Journal of Management 20, 1–14) and that elements of the literature emphasise that discretionary aspects of social responsibility, including corporate donations, may not be in the financial interests of organizations (e.g. Friedman, M.: 1970, “The Social Responsibility of Business is to Increase its Profits”, New York Times Magazine, September 13), this is a significant finding. It suggests that philanthropic expenditures may play a significant role in stakeholder management and may, in particular, lead to stakeholders holding more positive impressions of philanthropic corporations. (shrink)

This study examines the moderating effects of corporate social responsibility (CSR) on the association between market orientation and firm performance in the context of an emerging economy. The results from a sample of firms that operate in Dubai indicate that CSR has a synergistic effect on the impact of market orientation on business performance. The results of our research on the moderating effects of CSR on market orientation subsets reveal that although CSR moderates the association between customer orientation and business (...) performance, it does not moderate the association between competitive orientation and interfunctional coordination and performance. The results of this study are discussed, and implications for practitioners and researchers are presented. (shrink)

Although agreement on the positive sign of the relationship between corporate social and financial performance is observed in the literature, the mechanisms that constitute this relationship are not yet well-known. We address this issue by extending management’s stakeholder theory by adding insights from psychology’s prospect decision theory and sociology’s resource dependence theory. Empirically, we analyze an extensive panel dataset, including information on disaggregated measures of social performance for the S&P 500 in the 1997–2002 period. In so doing, we enrich the (...) extant literature by focusing on stakeholder heterogeneity, perceptional framing, and disaggregated measures of corporate social performance. (shrink)

A variety of stakeholders including investors, corporate managers, customers, suppliers, employees, researchers, and government policy makers have long been interested in the relationship between the financial performance of a corporation and its commitment to business ethics. As a subject of research, the relations between business ethics and corporate valuation has yet to be thoroughly quantified and investigated. This article is an effort to amend this inadequacy by demonstrating a statistically significant association between ethical commitment and corporate valuation measures. Consistent with (...) anecdotal evidence, we have found a significant association between the ethical commitment of Korean companies and their valuation on the Korean stock market. However, the result reveals that the association between ethical commitment and financial performance is not significantly supported. (shrink)