With a meta-analysis of 85 studies and 190 experiments, the authors test the relationship between socially responsible investing and financial performance to determine whether including corporate social responsibility and ethical concerns in portfolio management is more profitable than conventional investment policies. The study also analyses the influence of researcher methodologies with respect to several dimensions of SRI on the effects identified. The results indicate that the consideration of corporate social responsibility in stock market portfolios is neither a weakness (...) nor a strength compared with conventional investments; the heterogeneous results in prior studies largely reflect the SRI dimensions under study. (shrink)

The relationship between firm financial performance and sustainability reporting (SR) has been extensively researched previously, but with inconsistent results. By incorporating the coercive isomorphism of the institutional theory, this study examines if the relationship is moderated by the ownership of institutional investors. Using data from a sample of 270 Malaysian public listed firms, the study tested two ordinary least square (OLS) regression models. The results show that firm performance and institutional ownership have a positive link to SR. (...) Further examination however discloses a negative moderation of institutional ownership on the relationship between firm performance and SR, thus fail to support the indication that institutional investors coerce the investee firms to utilise their firm performance for sustainability activities. This study adds to SR-related literature by providing reliable and objective findings and directions for future studies in this context. (shrink)

This paper empirically examines the financial performance of a UK unit trust that was initially “conventional” and later adopted socially responsible investment (SRI) principles (ethical investment principles). Comparison is made with three similar conventional funds whose investment objectives remained unchanged. Analysis techniques employed in previous studies find similar results: mean risk-adjusted performance is unchanged by the switch to SRI, with no evidence of over-or under-performance relative to the benchmark market index by any of the four funds. (...) More interestingly, changes in variability of returns over time are also modelled using generalised autoregressive conditional heteroscedasticity models, not previously applied to SRI funds so far as is known. Results show a temporary increase in variability of returns, followed by a return to previous levels after around 4 years. Evidence shows the increased variability to be associated with the adoption of SRI rather than with a change in fund management. Possible explanations for the subsequent reduction in variability include the spread of corporate social responsibility activities by firms and learning by fund managers. In addition to reporting on a previously unobserved phenomenon, this paper raises questions for further research. (shrink)

This research note analyzes the relationship between indicators of corporate social and financial performance within a comprehensive theoretical framework. The results, based on data for 67 large U.S. corporations for 1982-1992, reveal no significant negative social-financial performance relationships and strong positive correlations in both contemporaneous and lead-lag formulations.

The vast majority of extant empirical research examining the relationship between corporate social performance and financial performance selects samples of only those firms which are observed engaging in CSP. In this study, the authors assert that firms’ efforts to pursue CSP and subsequently their appearance in social-choice investment advisory firms’ ranking databases are non-random. Studying the CSP–FP link using selected samples of only those firms whose social performance is ranked by SIA firms introduces a sample-selection bias (...) which limits generalization of results to a population of all firms, and at worst provides alternate explanations for observed relationships. The authors test these assertions on a large sample of public corporations in the United States over 6 years and find a sample-selection bias. Upon correction of this bias, this study confirms the positive impact of CSP on FP. (shrink)

This study examines whether differences in financial performance exist for investment trusts which base their portfolio selection primarily on an ethical screen, compared to indexes which incorporate a broader spectrum of investments. Results indicate that on a risk-adjusted basis there is an insignificant difference in the financial performance of these trusts against three common market benchmarks. However as to the extent of the directional effect, there does exist slightly superior financial performance by ethical trusts (...) against their respective industry average indexes, but an underperformance against a smaller company's index and the market as a whole. The lack of a distinct advantage in the short to medium term for applying an ethical screen, may in part be due to the recent development of ethical investments in Australia. Stronger performances by older ethical investment trusts may indicate superior returns are more likely to occur over a longer term. (shrink)

This paper investigates the correlation between the quality of corporate social responsibility disclosure and financial performance. It also investigates the moderating role of chief executive officer power in the relationship between the quality of CSR disclosure and firm value in Chinese listed companies. The evidential research used the up-to-date sample of unbalanced findings for the period of 2014–2020, from the registered Chinese firms in the Shenzhen and Shanghai Stock Exchanges as samples for the study. As a starting point (...) technique, the STATA 15 has been used to test pooled ordinary least squares regression on a sample of Chinese listed companies. We use 1-year lagged regression and two SLS regressions to monitor the potential endogeneity problem. The imbalanced data set was received from the China Stock Market and Accounting Research web page, which is the most significant source of information for Chinese publicly listed firms. Data on CSR information items and media reporting are compiled manually. The findings of the study revealed that there are positive FP consequences for the companies engaged in the quality of CSR disclosure. We also report that higher CEO power negatively enhances the quality of CSR disclosure effect on the FP of FV. The research investigates the impact of CSR disclosure and FP by presenting evidence of the moderating role of CEO power. Therefore, it is suggested that a higher law for CSR engagement and disclosure be implemented in China, and robust measures for the implementation of CEO power, although there are financial advantages to be gained. A key relevance to the empirical quality of CSR disclosure research can be recognized as the moderating role of CEO power in the quality of CSR disclosure, FP, and FV in the context of Chinese study. The findings are robust with the use of an instrumental variable method. (shrink)

This article analyzes the financial performance and managerial abilities of a sample of US and European socially responsible (SR) mutual funds. The period analyzed commences from January 1994 and concludes in January 2013 and yields 18 US and 89 European green funds. The results obtained for green fund managers are compared with those achieved for conventional and other forms of SR mutual fund managers. We control for the mutual fund investment objective (distinguishing between domestic and global portfolios) and (...) for the effect of crisis market periods. For US SR funds, partitioning the data into crisis and normal periods reveals that SR funds obtain statistically insignificant performance in crisis periods but underperform relative to the market in normal periods. Furthermore, the findings indicate that green funds do not perform worse than other forms of SR mutual funds. For European SR funds partitioning the data into crisis and normal periods reveals that SR funds obtain statistically insignificant performance irrespective of market conditions. Similar to the US findings, green Europe SR funds do not perform worse than other forms of SR mutual funds. Managerial abilities are not evident in the findings though unsuccessful timing of the market is revealed for both Europe and US global green funds. When analyzing managerial abilities in crisis and non-crisis market periods, US green fund managers achieve better results in crisis market periods and the opposite occurs for green fund managers in European market. (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)

This study formulates a two-factor empirical model under the intertemporal CAPM framework to evaluate the cross-sectional implications of socially responsible investments in the US equity market. Our results show that socially responsible investments have no asset pricing impact on the US market. We argue that this ‘no financial impact’ finding indicates that investors will not be disadvantaged financially by investing in socially responsible funds or corporations.

This study employs the Porter hypothesis framework to test the moderating role of production cost in the relationship between resource-efficiency actions and financial performance for German small and medium-sized enterprises (SMEs). For this purpose, we employ the 2012, 2018, and 2021 Flash Eurobarometer surveys to analyze how consistently SMEs adopt resource-efficiency actions, and the impact of these actions on their performance and costs. We also conduct a generalized method of moments regression analysis (GMM). Among the seven resource-efficiency (...) actions proposed, saving water had a significant positive (negative) influence on financial performance in 2012, 2021, and (2018). Saving energy and using renewable energy had a positive and significant (insignificant) effect on financial performance in 2018, 2021, and (2012). Finally, selling scrap material to other companies had a positive and significant impact in all years. Furthermore, increased production costs negatively moderate the relationship between eco-efficiency action scores and financial performance. The results indicate that the “strong” version of the Porter hypothesis is not supported: It only holds when the implementation of eco-efficiency actions reduces production costs and increases financial performance. (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)

Financial wellbeing is an emerging variable in business psychology that is expected to measure overall financial status and future financial trajectories. Financial intelligence and wellbeing have been key determining factors for the financial performance of entrepreneurs. The present study aimed to examine the crucial financial determinants and social capital factors for the entrepreneurial intentions and their financial performances among the 326 entrepreneurs in China. The study's findings showed that the key financial (...) indicators and social capital are significantly related to entrepreneurial intentions, which considerably predict the entrepreneurial financial performance. The mediating relationships also reported that entrepreneurial intentions and financial intelligence significantly mediate the relationship among social capital, financial wellbeing, and entrepreneurial financial performance. The present study has highlighted the implications for potential entrepreneurs for improving their financial performance through sustainable social capital, financial wellbeing, and financial intelligence. This study will also help the strategists in screening the individuals registering as entrepreneurs based on their financial intelligence quotient. The present study enriches the literature by offering an integrated model on financial wellbeing and entrepreneurial financial performance. (shrink)

The comparison of corporate social performance with corporate financial performance has been a popular field of study over the past 25 years. The results, while broadly conclusive of a positive relationship, are not entirely consistent. In addition, most of the previous studies have concentrated on large-scale cross-industry studies and often with a single variable for corporate social performance, in order to produce statistically significant results. This weakens the richness of understanding that might be obtained from a (...) single industry study with multiple social variables, which would also allow investigation of inter-relationships between individual and sub-sets of social performance measures and between individual and sub-sets of social performance and financial performance measures. There have also been criticisms that the results lack a rigorous theoretical basis, and the paper demonstrates clearly how stakeholder theory must form the basis for this area of research. Following a review of the literature this paper presents the initial findings from a study of the U.K. Supermarket industry which suggest that contemporaneous social and financial performance are negatively related, while prior-period financial performance is positively related with subsequent social performance. Positive relationships between both age and size of the company with social performance are also found. (shrink)

This study investigates the impacts of intellectual capital through Value-Added Intellectual Capital (VAIC) and its components: human capital efficiency (HCE) and structural capital efficiency (SCE) on financial performance in terms of return on assets (ROA) and return on equity (ROE). In addition, this study compares the effects between firms from financial and pharmaceutical industries. A total of 149 Vietnamese firms comprising of 108 financial firms and 41 pharmaceutical firms were examined. Based on the findings, VAIC and (...) HCE show beneficial impacts on both financial performance measures, ROA, and ROE. However, SCE shows adverse and beneficial implications on ROA and ROE, respectively. In terms of industry comparison, VAIC has positive effects on ROA and ROE among the firms from financial industry, whereas it has no effect in the firms from pharmaceutical industry. The effect of HCE on ROA is stronger in the firms from financial industry than firms from pharmaceutical industry while the effect of HCE on ROE is stronger in the firms from pharmaceutical industry than firms from financial industry. The effect of SCE on ROA is stronger in the pharmaceutical firms than financial firms while the effect of SCE on ROE is stronger in the financial firms than pharmaceutical firms. Lastly, the implications of the importance of knowledge-based resources on value creation were elaborated. (shrink)

This study investigates the link between female board directors and company financial performance and agency costs in Sri Lanka's publicly listed companies. In order to investigate the impact of board gender diversity on firm financial performance, a dynamic panel generalised method of moment estimation is applied. Three variables are used as proxies for gender diversity of the board of directors, namely the percentage of women on the board, a dichotomous dummy and the Blau index. A Tobit (...) model with endogenous regressors is used to investigate the impact of female board members on agency cost, using growth opportunities as a measure of agency cost. After controlling for size, industry and other corporate governance measures, this study finds a significant negative relationship between the proportion of women on boards and firm value along with an increase in company agency cost. This evidence provides insights for governments and academic institutions in their efforts to provide resources that will help enhance women's leadership skills. (shrink)

This study examines the impact of corporate governance on the financial performance of Asia Pacific stocks in three Asian countries: Malaysia, Thailand and Singapore. By including a sample of 159 firms listed on three Asian stock markets from 2013 to 2017, this study found that the effects of corporate governance mechanisms vary significantly among the three Asian markets. Specifically, this study shows that board size has positively influenced listed firms' financial performance in the Singapore Exchange. However, (...) our findings show that board size has negatively affected listed firms' financial performance in Thailand's Stock Exchange. In addition, our results reveal that board independence has negatively influenced listed firms' financial performance in Bursa Malaysia. Finally, this study provides implications for regulatory authorities in the Asian stock markets to separate between chairman and CEO roles since most Asian firms are owned and directed by business families. (shrink)

We examine the key elements of board diversity (or heterogeneity) amongst listed companies operating in an emerging economy (Mauritius) and the extent to which these influence financial performance. Specifically, we ask whether there is evidence of tangible benefits in pursuing a strategy of board diversity in terms of gender-, age-, educational background and independence in a corporate context which has long been dominated by family-led and ‘closed’ boardrooms. In light of recent corporate governance developments which appear to foster (...) greater diversity, we examine data from the 2007 annual reports of all 42 companies listed on the Stock Exchange of Mauritius. We find that (i) women remain poorly represented on boards (ii) there is a relatively satisfactory level of heterogeneity in terms of educational background, age and independence in relation to developed countries. We also find significant regression coefficients for all four variables in terms of their impact on short-term performance. However, these relationships are characterised by both negative and positive impacts thereby leading to discussions on the validity of a strict heterogeneous or homogeneous board composition in the context of a developing economy. (shrink)

This article investigates the role of commonly specified control variables in moderating the relationship between corporate social performance (CSP) and corporate financial performance (CFP). In addition, there are separate measures for positive (strengths) social actions, and for negative (concerns) social actions. The results support the positive relationship between CSP and CFP. The best model, as determined using factorial analysis of variance, is one which has the following control variables: size, industry, risk, and research and development expenditures. In (...) examining the CSP/CFP relationship, researchers must control for these variables, in order to properly specify the model. (shrink)

This study investigates financial correlates of corporate philanthropy in Fortune 1000 companies using structural equation modeling. The results suggest that cash flow (one of the most discretionary types of organizational slack) has a significant impact on a firm’s cash donations to charitable causes, but monetary donations do not affect firm financial performance. These findings support the accepted view of corporate philanthropy as a discretionary social responsibility and the traditional thinking about firm giving in the business and society (...) literature—that doing well enables doing good. Contrary to some contemporary thinking, the findings imply no significant effect on profits from corporate generosity. (shrink)

The relationship between corporate social responsibility and corporate financial performance has long been a central and contentious debate in the literature. However, prior empirical studies provide indefinite conclusions. The purpose of this study is to review systematically and quantify the CSR–CFP link in a meta-analytic framework. Based on 119 effect sizes from 42 studies, this study estimates that the overall effect size of the CSR–CFP relationship is positive and significant, thus endorsing the argument that CSR does enhance (...) class='Hi'>financial performance. Furthermore, this work sheds light on the causal relationship between CSR and CFP. Subsequent financial performance is associated with prior social responsibility, while the reverse direction is not supported. This finding supports the instrumental stakeholder theory. As predicted, the meta-analysis results indicate that the measurement strategies of the two key constructs of CSR and CFP explain some variations of the CSR–CFP relationship. Last, this study examines the moderating effect of the environmental context on the CSR–CFP link. This work proposes that CSR in the developed world, with a relatively mature institutional system and efficient market mechanism, will be more visible than CSR in the developing world. The results show that the CSR–CFP relationship is stronger for firms from advanced economies than for firms from developing economies. (shrink)

Proactive corporate social responsibility (CSR) involves business strategies and practices adopted voluntarily by firms that go beyond regulatory requirements in order to manage their social responsibilities, and thereby contribute broadly and positively to society. Proactive CSR has been less researched in small and medium enterprises (SMEs) compared to large firms; and, whether SMEs are ideally placed to gain competitive advantage through such activity therefore remains a point of debate. This study examines empirically the association between three specified capabilities (shared vision, (...) stakeholder management and strategic proactivity), proactive CSR and financial performance in SMEs. Using quantitative data collected from a sample of 171 SMEs in the machinery and equipment sector of the Australian manufacturing industry, we find that all specified capabilities are positively associated with adoption of proactive CSR by SMEs, and that proactive CSR is, in turn, associated with an improvement in firm financial performance. Evidence of a fully mediating role for proactive CSR on the association between capabilities and financial performance presented in this study aligns with RBV theory that suggests adoption of value-creating strategies that make the most effective use of a firm’s capabilities is essential to financial success. The study contributes to the CSR literature by demonstrating a case for SMEs being able to maximise financial returns whilst proactively making progress towards CSR. (shrink)

Intellectual Capital is a driving force behind the financial performance of non-financial firms. Investing in intellectual and physical capital allows companies to optimize their financial performance by maximizing resource utilization. This study aims to determine whether IC efficiency impacts the financial performance of listed Pakistani and Indian companies between 2010 and 2020. Return on Assets and Return on Equity are used to calculate financial performance, and IC is calculated using the modified (...) Value-Added Intellectual Coefficient model. Regression analysis is performed using the STATA software developed by the South Texas Art Therapy Association. Human Capital, Structural Capital, and Capital Employed have a significant impact on Pakistani and Indian firms’ financial performance. Resource-based theory supports these findings. The findings should provide management with a prompt to improve financial performance and emphasize the importance of IC. A rare study has addressed the impact of IC on firm financial performance using the MVAIC model, rather than the VAIC model, in Pakistan and India. (shrink)

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. (shrink)

One of the older questions in the debate about Corporate Social Responsibility (CSR) is whether it is worthwhile for organizations to pay attention to societal demands. This debate was emotionally, normatively, and ideologically loaded. Up to the present, this question has been an important trigger for empirical research in CSR. However, the answer to the question has apparently not been found yet, at least that is what many researchers state. This apparent ambivalence in CSR consequences invites a literature study that (...) can clarify the debate and allow for the drawing of conclusions. The results of the literature study performed here reveal that there is indeed clear empirical evidence for a positive correlation between corporate social and financial performance. Voices that state the opposite refer to out-dated material. Since the beginnings of the CSR debate, societies have changed. We can therefore clearly state that, for the present Western society, “Good Ethics is Good Business.”. (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)

This paper argues that the metaphysics of financial performance in the conceptual framework employed by accounting standard-setters is incoherent: income and expenses cannot, as the framework holds, both be independent elements of financial statements, identified from underlying events, tested for recognition and measured by discrete acts, separately from the identification, testing and measurement of other elements and satisfy the analytical relationship between performance and position embraced by the framework. An alternative conceptualisation is proposed, under which income (...) and expenses are part of a wider system of classifying all changes in assets and liabilities, measured indirectly. This approach improves the metaphysical coherence, and thus the intellectual strength, of the framework project; while it leaves the measurement of financial performance unchanged, by emphasising the importance of classification, it invites further attention to the presentation of financial performance, with the potential for improving the usefulness of disclosures. (shrink)

There has been some theoretical and empirical debate that the positive relationship between corporate social performance (CSP) and firm financial performance (FFP) is spurious and in fact caused by a third factor, namely large firm size. This study examines this question by integrating three meta-analyses of more than two decades of research on (1) CSP and FFP, (2) firm size and CSP, and (3) firm size and FFP into one path-analytic model. The present study does not confirm (...) size as a third factor which would confound the relationship between CSP and FFP. That is, even if firm size is controlled for across studies (comprising, on average, over 15 000 observations), CSP and FFP remain positively correlated, showing a "true-score" corrected path coefficient p of 0.37. (shrink)

This article extends earlier research concerning the relationship between corporate social performance and corporate financial performance, with particular emphasis on methodological inconsistencies. Research in this area is extended in three critical areas. First, it focuses on a particular industry, the chemical industry. Second, it uses multiple sources of data-two that are perceptual based (KLD Index and Fortune reputation survey), and two that are performance based (TRI database and corporate philanthropy) in order to triangulate toward assessing corporate (...) social performance. Third, it uses the five most commonly applied accounting measures in the corporate social performance and corporate financial performance (CSP/CFP) literature to assess corporate financial performance. The results indicate that the a priori use of measures may actually predetermine the CSP/CFP relationship outcome. Surprisingly, Fortune and KLD indices very closely track one another, whereas TRI and corporate philanthropy differentiate between high and low social performers and do not correlate to the firm's financial performance. (shrink)

This article extends earlier research concerning the relationship between corporate social performance and corporate financial performance, with particular emphasis on methodological inconsistencies. Research in this area is extended in three critical areas. First, it focuses on a particular industry, the chemical industry. Second, it uses multiple sources of data-two that are perceptual based (KLD Index and Fortune reputation survey), and two that are performance based (TRI database and corporate philanthropy) in order to triangulate toward assessing corporate (...) social performance. Third, it uses the five most commonly applied accounting measures in the corporate social performance and corporate financial performance (CSP/CFP) literature to assess corporate financial performance. The results indicate that the a priori use of measures may actually predetermine the CSP/CFP relationship outcome. Surprisingly, Fortune and KLD indices very closely track one another, whereas TRI and corporate philanthropy differentiate between high and low social performers and do not correlate to the firm's financial performance. (shrink)

Sustainability is concerned with the impact of present actions on the ecosystems, societies, and environments of the future. Such concerns should be reflected in the strategic planning of sustainable corporations. Strategic intentions of this nature are operationalized through the adoption of a long-term focus and a more inclusive set of responsibilities focusing on ethical practices, employees, environment, and customers. A central hypothesis, that we test in this paper is that companies which attend to this set of responsibilities under the term (...) superior sustainable practices, have higher financial performance compared to those that do not engage in such practices. The target population of this study consists of the top 100 sustainable global companies in 2008 which have been selected from a universe of 3,000 firms from the developed countries and emerging markets. We find significant higher mean sales growth, return on assets, profit before taxation, and cash flows from operations in some activity sectors of the sample companies compared to the control companies over the period of 2006–2010. Furthermore, our findings show that the higher financial performance of sustainable companies has increased and been sustained over the sample. Notwithstanding sample limitation, causal evidence reported in this paper suggests that, there is bi-directional relationship between corporate social responsibilities practices and corporate financial performance. (shrink)

Prior studies assert that social trust may positively influence the economic performance of countries and firms (within those countries). This paper proposes a more nuanced mechanism whereby corporate social responsibility (CSR) mediates the relationship between country-level social trust and firm-level financial performance. Anchored in neo-institutional theory, we theorize that social trust instills norms of trustworthiness and willingness to trust others guiding individual and corporate behaviors. In order to comply with such norms and gain legitimacy, firms in high-trust (...) society are more likely to commit to CSR activities that serve the interests of stakeholders. CSR activities, in turn, can positively influence financial performance by enabling firms to access stakeholders' resources and capabilities and to decrease transactions costs in the stakeholder relationships. We tested our theory by analyzing 9818 firm-year observations across 34 countries, during the 2006 to 2015 period. Our analysis shows the expected CSR mediation in the relationship between social trust and firm-level financial performance. Our findings are robust across different models addressing the concerns of endogeneity, alternative measures, and potential moderators. (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)

Investors' confidence in the financial market is boosted by good corporate governance (CG). Good governance builds trust and improves an organization's financial performance (FP). However, organizations with bad management lose the trust of their stakeholders because they do not perform well financially. Therefore, the purpose of this study is to examine the influence of CG 89; on FP through mediating the role of humble leadership (HL) and monetary incentive (MI) as a moderator between CG and HL. Data (...) were collected from 300 respondents who were working in various cement manufacturing organizations located in different cities of Pakistan. The analysis was performed using SPSS software version 25 and AMOS version 22 software to work out the study sample size. The result revealed that the framework of CG has a positive impact in terms of FP. Furthermore, HL positively and significantly mediates on CG, and FP is inextricably linked. However, MI acts as a moderator between CG and HL, but despite strengthening, it weakens the impact of CG' on HL. This study contributes toward the literature, specifically toward the expectancy theory literature. Finally, some theoretical and practical implications at the organizational level are offered, describing how CG influences FP within the organization, and research limitations and future directions are presented. (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)

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)

Whether ethical screening affects portfolio performance is an important question that is yet to be settled in the literature. This paper aims to shed further light on this question by examining the performance of a large global sample of Islamic equity funds from 1984 to 2010. We find that IEFs underperform conventional funds by an average of 40 basis points per month, consistent with the underperformance hypothesis. In line with popular media claims that Islamic funds are a safer (...) investment, IEFs outperformed conventional funds during the recent banking crisis. However, we find no such outperformance for other crises or high volatility periods. Based on fund holdings-based data, we provide evidence of a negative curvilinear relation between fund performance and ethical screening intensity, consistent with a return trade-off to being more ethical. (shrink)

The monitoring role performed by the board of directors is an important corporate governance control mechanism, especially in countries where external mechanisms are less well developed. The gender composition of the board can affect the quality of this monitoring role and thus the financial performance of the firm. This is part of the “business case” for female participation on boards, though arguments may also be framed in terms of ethical considerations. While the issue of board gender diversity has (...) attracted growing research interest in recent years, most empirical results are based on U.S. data. This article adds to a growing number of non-U.S. studies by investigating the link between the gender diversity of the board and firm financial performance in Spain, a country which historically has had minimal female participation in the workforce, but which has now introduced legislation to improve equality of opportunities. We investigate the topic using panel data analysis and find that gender diversity – as measured by the percentage of women on the board and by the Blau and Shannon indices – has a positive effect on firm value and that the opposite causal relationship is not significant. Our study suggests that investors in Spain do not penalise firms which increase their female board membership and that greater gender diversity may generate economic gains. (shrink)

The purpose of this study is to examine the relationship between the corporate social performance of an organization and three variables: the size of the organization, the financial performance of the organization, and the environmental performance of the organization. By empirically testing data from 1987 to 1992, the results of the study show that a firm's corporate social performance is indeed impacted by the size of the firm, the level of profitability of the firm, and (...) the amount of pollution emissions released by the firm. (shrink)

The study investigates the effect of board characteristics and firm performance on disclosure tones by considering DICTION five master variables namely activity, optimism, certainty, realism and commonality tones using a sample of 779 annual reports of GCC listed firms (2012 to 2018). Disclosure tones of the sampled GCC firms were measured through corporate narrative disclosures by DICTION 7.0 software. Then, the ordinary least square regression analysis was conducted. The main findings of the study show that firm performance has (...) a significant effect on disclosure tones in terms of activity, optimism, certainty, and realism tones except for commonality reported tone. Board characteristics have different effects on the five disclosure tones. The study offers a unique contribution to accounting literature as it is one of the first studies in the Gulf region that seeks to examine the relationship between disclosure tones and firm performance as well as board governance. (shrink)

The purpose of this study is to extend prior research on this topic by investigating whether the impact of ownership concentration moderates the link between corporate social performance and financial performance. This study uses a set of unique, hand-collected pollution control data to measure CSP, based on a sample of Taiwanese listed companies during the period from 1996 to 2006. The results of the empirical analysis provide firm support for the idea that the divergence between control rights (...) and the cash flow rights of controlling owners negatively moderates the link between social and short- and long-run FP. (shrink)

One of the older questions in the debate about Corporate Social Responsibility (CSR) is whether it is worthwhile for organizations to pay attention to societal demands. This debate was emotionally, normatively, and ideologically loaded. Up to the present, this question has been an important trigger for empirical research in CSR. However, the answer to the question has apparently not been found yet, at least that is what many researchers state. This apparent ambivalence in CSR consequences invites a literature study that (...) can clarify the debate and allow for the drawing of conclusions. The results of the literature study performed here reveal that there is indeed clear empirical evidence for a positive correlation between corporate social and financial performance. Voices that state the opposite refer to out-dated material. Since the beginnings of the CSR debate, societies have changed. We can therefore clearly state that, for the present Western society, “Good Ethics is Good Business.”. (shrink)

The purpose of this article is to examine empirically the impact of environmental certification on firm financial performance (FP). The main question is whether there is a "green premium" for certified firms, and, if so, for what kind of certification. We analyze the short-run and the long-run stock price performance using an event-study methodology on a sample of Canadian and U.S. firms. The results of short-run event abnormal returns indicate that forest certification does not have any significant (...) impact on firm FP regardless of the certification system carried out by firms. Unlike the short-run results, the long-run post-event abnormal returns suggest that forest certification has, on average, a negative impact on firm FP. However, the impact of forest certification on firm FP depends on who grants the certification, since only industry-led certification (Sustainable Forestry Initiative, Canadian Standards Association and ISO14001) are penalized by financial markets, whereas non-governmental organizations—led Forest Stewardship Council certification is not. (shrink)

A primary issue in the field of business and society over the past 25 years has been the relationship between corporate social performance and corporate financial performance. Recently, Griffin and Mahon (1997) presented a table categorizing studies that have investigated this relationship. Motivated by concerns with this table, as well as a desire to account for progress in research in this area, the authors reconstructed it. The authors present a portrait of this relationship that is (a) substantially (...) different from that shown in the Griffin and Mahon table and (b) more consistent with the latest research on the topic. (shrink)