Do Investors Value a Firm’s Commitment to Social Activities?

Journal of Business Ethics 114 (4):607-623 (2013)

Authors
Waymond Rodgers
University of Hull
Abstract
Previous empirical research has found mixed results for the impact of corporate social responsibility (CSR) investments on corporate financial performance (CFP). This paper contributes to the literature by exploring in a two stage investor decision-making model the relationship between a firm’s innovation effort, CSR, and financial performance. We simultaneously examine the impact of CSR on both accounting-based (financial health) and market-based (Tobin’s Q) financial performance measures. From a sample of top corporate citizens, we find that: (1) a firm’s social responsibility commitment (CSR) contributes to its financial performance; (2) after controlling for investment in innovation activities, CSR continues to have a positive impact on a firm’s financial performance; (3) the customer dimension of CSR has a positive effect on both CFP measures, whereas the employee dimension indicates a significant impact only on financial heath; and (4) the community relation dimension of CSR only affects the market-based CFP measure of firms with high innovation intensity
Keywords Corporate social responsibility  Corporate financial performance  Innovation  Social dimensions  Investor decision making
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DOI 10.1007/s10551-013-1707-1
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Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility.Michael L. Barnett - 2005 - Proceedings of the International Association for Business and Society 16:287-292.

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