Impact of Corporate Political Activity on the Relationship Between Corporate Social Responsibility and Financial Performance: A Dynamic Panel Data Approach (original) (raw)
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Strategic Management Journal, 2000
This article will support on the econometrics of panel data to analyse the influence of corporate social responsibility (CSR) on the financial performance measured by several indicators. From a sample of 20 firms listed on the stock exchange of Casablanca between 2007 and 2010. Our research found a negative and significant impact of the CSR on financial performance. The negative influence is important in large companies, which means it is a mediating factor.
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International Journal of Corporate Governance, 2012
Rather than re-examine the question of whether doing good generally helps a company to do well, this study draws on contingency theory to empirically examine when doing good helps a company do as well as possible. Using panel data, we examine the effects of industry life cycle, munificence, and instability on the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP). Our findings indicate that life cycle has a significant impact on the CSR-CFP relationship, as does industry instability. These findings suggest that CSR helps the bottom line considerably -if it is applied at the right time.
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International Journal of Business and Management
This study examines the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP), shedding new light on the lack of academic consensus and prevailing failure to deal with endogeneity in data. To this purpose, the authors recalculate ESG performance starting from the four pillars (economic, environmental, governance and social) provided by Thomson Reuters’ Asset4 database, able to determine a firm’s CSP. We adjust each ESG pillar score accounting for the firm’s sector, size and headquarter geographic area. We empirically test the relationship with a Generalized Method of Moments approach (GMM) in order to tackle the widely disputed endogeneity issues arising in this type of datasets. Results highlight a positive relationship between CSR, as measured in a tailored manner in this study, and corporate financial performance.
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Investment management & financial innovations, 2016
This study investigates whether corporate social responsibility (CSR) affects the financial performance of the United States (US) companies. In particular, the impact of CSR on financial performance is investigated in terms of involvement in socially responsible initiatives instead of outcome. The Environmental, Social and Governance disclosure score as calculated by Bloomberg is used as a proxy for corporate involvement in socially responsible initiatives. Fixed effects regression is employed to estimate the relationship between the extent of corporate social disclosure (CSD) and financial performance using the data of listed companies on the Standard & Poor's 500 during the period 2009-2013. The results suggest that the involvement in socially responsible initiatives has a significantly positive effect on financial performance. In addition, the control variables, such as total compensation to directors, CEO duality and women presence on board are statistically significant to financial performance. It is important to incorporate a longer period in order to validate the positive relationship between CSR and financial performance, whilst the sample is focused on large in size US companies. This study chose to approach the topic from a different angle in order to provide an alternate perspective on this issue taking into account the involvement of socially responsible initiatives via CSD.
The Economics and Politics of Corporate Social Performance
Business and Politics, 2000
Firms operate in a capital market, a product market, and a market for social pressure directed at them by social activists, NGOs, and governments. An equilibrium in these three markets yields a three-equation structural model that relates corporate financial performance (CFP), corporate social performance (CSP), and social pressure. This paper estimates the simultaneous equation model for a panel of over 1,600 firms and finds that CFP is uncorrelated with CSP and negatively correlated with social pressure. CSP is decreasing in CFP and increasing in social pressure. Social pressure is increasing in CSP and decreasing in CFP, which is consistent with social pressure being directed to soft targets. Disaggregating the panel indicates that CFP is positively correlated with CSP for firms in consumer markets and negatively correlated for industrial markets. For consumer markets, CSP is increasing in CFP, which is consistent with a perquisites hypothesis that managers spend on CSR when they...
Corporate social responsibility and financial performance
This study provides quantitative evidence on the positive effect of spending on socially responsible causes on the long-term growth of U.S technology companies. Maximizing shareholder wealth remains the overarching principle driving organizational strategies, but this has always conflicted with other stakeholders' interests. Because of these conflicting priorities, entrenching the principles of social responsibility has become imperative. We leverage content analysis, fixed-effects and pooled regression models to examine the effect of engaging in CSR on tech companies' corporate financial performance in the U.S. The empirical study consists of panel data of the top 100 tech companies listed on the S&P 500 for the period 2017 and 2019. We examine the link between corporate financial performance and CSR proxies. The main results indicate that tech companies that spend more on CSR experience a corresponding increase in revenue and profitability. Contrary to previous studies, we observe insignificant evidence to support a relationship between CSR and Tobin's Q.
Applied Economics, 2008
We investigate whether inclusion and permanence in the Domini social index affects corporate performance on a sample of around 1,000 firms in a 13-year interval by controlling for size, industry, business cycle and time invariant firm idiosyncratic characteristics. Our results find partial support to the hypothesis that corporate social responsibility is a move from the shareholders wealth to a multistakeholders welfare target. On the one side, permanence into the Domini index is shown to increase (reduce) significantly total sales per employee (returns on equity but not when large and R&D investing firms are excluded from the sample). On the other side, lower returns on equity for Domini firms seem nonetheless to be accompanied by relatively lower conditional volatility and lower reaction to extreme shocks with respect to the control sample. An explanation for these findings, suggested by the inspection of Domini criteria, is that social responsibility implies, on the one side, decisions leading to higher cost of labour and of intermediate output, but may, on the other side, enhance involvement, motivation and identification of the workforce with company goals with positive effects on productivity.
On the relation between corporate social responsibility and financial performance
Strategic Management Journal, 2020
This study reexamines the relation between CSR and financial performance by benchmarking firms against industry peers in a given year to identify best-in-class and worst-in-class firms. We also address distributional issues when using CSR ratings (clustering of CSR scores around the median and material differences across industries and time) and financial performance ratios (the possible influence of extreme values). We find that the best-in-class firms outperform their industry peers in terms of operating performance and have higher relative market valuations (Tobin's Q). When we control for endogeneity, we find that the significant relation between operating performance and CSR categories disappears, calling into question whether this relation is causal. However, we continue to find that best-in-class firms receive higher relative market valuations than industry peers.
Future Business Journal
The main objective of this study is to determine the CSR disclosure and to find out the association between CSR and FP by the public companies of Maldives. This study used a mixed-method research choice and is longitudinal research. The study period was from 2014 to 2018. Data were collected from annual reports of the listed companies in MSE. The sampling technique used was judgmental sampling, and the data were analyzed from STATA 15 software by using panel data regression. The finding reveals that diversity and ROA, environment and ROE, diversity, and EPS, and when the size of the firm controlled, there exhibit significant negative relation between CSR and ROA; hence, it can conclude that there exists a significant negative relationship between CSR and FP. This study has implications for the academician and corporate world in understanding CSR and FP in developing countries like the Maldives. One of the main consequences of this study is the CSR framework adopted in this study whi...
Corporate social responsibility and financial performance: A non-linear and disaggregated approach
The present paper examines the relationship between Corporate Social Performance (CSP) and Corporate Financial Performance (CFP), using both accounting-based (Return on Assets and Return on Capital) and market-based (Excess Stock Returns) performance indicators. We use Bloomberg's Environmental Social Governance (ESG) Disclosure score covering the S&P500 firms in the period 2007–2011 which allows for the examination of both linear and nonlinear relationships to be considered. The results of the linearmodel suggest that there is a significant negative relationship between CSP and Return on Capital. However, the non linear models provide evidence of a U-shaped relationship between CSP and the accounting-based measures of CFP, suggesting that in the longer runCSP effects arepositive.Most prominent among our results is that fact that by disentangling theESGDisclosure score into its environmental, social and governance sub-components, we find that a U-shaped relationship exists only between the governance sub-component and CFP. A straightforward implication of our findings suggests that in order for CSR to serve the interests of the shareholders, a long-run planning and considerable resources should be dedicated at this direction, given that CSR expenditure pays off only after a threshold of CSP has been reached. Furthermore, the fact that governance is the key driver affecting the CSP-CFP relationship suggests that CSR investments should be directed to this component.