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 linear model 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 accountingbased measures of CFP, suggesting that in the longer run CSP effects are positive. Most prominent among our results is that fact that by disentangling the ESG Disclosure 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.
We investigate the impact of alternative certifying institutions on firms' incentives to engage in costly Corporate Social Responsibility (CSR) activities as well as their relative market and societal implications. We find that the CSR certification standard is the lowest under for-profit private certifiers and the highest under a Non Governmental Organization (NGO), with the standard of a welfare-maximizing public certifier lying in between. Yet, regarding industry output, this ranking is reversed. Certification of CSR activities is welfare enhancing for consumers and firms and should be encouraged. Finally, the market and societal outcomes of CSR certification depend crucially on whether certification takes place before or after firms' CSR activities. JEL classification: L13, M14 Certification des activités de responsabilité sociale des compagnies dans des marchés oligopolistiques. On fait enquête sur l'impact de diverses institutions de certification sur les incitations des entreprisesà s'engager dans des activités coûteuses pour assurer la responsabilité sociale ainsi que sur les implications relatives de ces sortes de certification pour le marché et la société. On découvre que le standard de certification est le plus bas pour ceux qui certifient les organisations du secteur privéà but lucratif, et le plusWe are grateful to three anonymous referees and the co-editor Joanne Roberts for their valuable comments and suggestions that contributed substantially in the improvement of the paper. We would also like to thank Certification of corporate social responsibilities 283 elevé pour ceux qui certifient les organisations non-gouvernementales, et que le standard d'un certificateur public qui viseraità maximiser le bien-être tombe entre les deux. Pour ce qui est de la production industrielle, l'ordre est inversé. La certification des activités de responsabilité sociale améliore le bien-être des consommateurs et des entreprises, et devraitêtre encouragée. Finalement, les impactséconomiques et sociaux de cette certification dépendent de manière cruciale du fait que la certification a eu lieu avant ou après ces activités.
In a differentiated Cournot duopoly, we examine the contracts that firms' owners use to compensate their managers and the resulting output levels, profits and social welfare. If products are either sufficiently differentiated or sufficiently close substitutes, owners use Relative Performance contracts. For intermediate levels of product substitutability, they use Market Share contracts. When owners do not commit over the types of contracts, each type is an owner's best response to his rival's choice. Product substitutability has differential effects on output levels and profits, depending on the configuration of contracts in the industry. Finally, managerial incentive contracts are welfare enhancing if they increase consumers' surplus. Copyright (C) 2010 John Wiley & Sons, Ltd.
We investigate the incentives of firms' owners to commit voluntarily to corporate social responsibility (CSR) activities in an oligopolistic market. The socially responsible attributes attached to products are considered as credence goods, with consumers forming expectations about their existence and level. We show that hiring an ‘individually’ socially responsible CEO and delegating to him the CSR effort and market decisions acts as a commitment device for the firm's owners and credibly signals to consumers that the firm will undertake the ‘missioned’ CSR activities. We also find that CSR activities are welfare enhancing for consumers and firms and thus, they should be encouraged. Copyright © 2013 John Wiley & Sons, Ltd.
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