A Meta-Analytic Review of Corporate Social Responsibility and Corporate Financial Performance

Abstract

The relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) 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 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.

The influence of social disclosure on the relationship between Corporate Financial Performance and Corporate Social Performance*

“…Companies geared towards Corporate Social Responsibility (CSR) will be rewarded in economic and nancial terms (Carroll, 2015). Despite the arguments that indicate a positive relationship between CSP and Corporate Financial Performance (CFP) and various empirical studies that support this positive relationship (Brammer & Millington, 2008;Isaksson & Woodside, 2016;Lu, Chau, Wang & Pan, 2014;Orlitzky, Schmidt & Rynes, 2003;Van Beurden & Gossling, 2008;Walsh, Weber & Margolis, 2003;Wang, Dou & Jia, 2015), it still lacks a full explanation; that is, it is inconclusive.…”

The relation between the CSR and the accounting information system data in Central and Eastern European (CEE) countries – the evidence of the Polish financial institutions

“…Corporate social responsibility has been a subject of great interest for more than 30 years among scholars from multiple management perspectives (Wang et al, 2016(Wang et al, : 1084. CSR can be defined as "the process of communicating the social and environmental effects of organizations' economic actions to particular interest groups within society and to society at large" (Gray et al, 1987: ix).…”

“…The relationship between CSR and corporate financial performance (CFP) has been a subject of numerous scientific studies since 50 years (Friedman, 1970;Preston & O'Bannon, 1997;Waddock & Graves, 1997;McWilliams & Siegel, 2001;Smith, 2002;Orlitzky et al, 2003;Allouche & Laroche, 2005;Margolis et al, 2007;Aggarwal, 2013;Kleine et al, 2013;Wang et al, 2016). The results do not lead to uniform conclusions, moreover they are inconclusive and conflicting.…”

“…This relationship is also significantly different between industries, sectors and institutions (Wang et al, 2016;Ioannou & Serafeim 2010). Furthermore, the researchers affirm that the heterogeneity of the CSR and CFP relationship may result from the measurement strategies of the two key constructs of CSR and CFP (Wang et al, 2016: 24).…”

“…Margolis and Walsh (2001) indicate that 53% of the empirical research reviewed confirms a positive impact of good financial performance on CSR activities, while 24% shows no relation, 19% mixed and 5% negative relation. This kind of causality of CSP and CFP researched is often the subject of integrative, quantitative meta-analyses with a methodologically more rigorous review in many substantive areas of the bidirectional relationship between CSR and CFP (Orlitzky et al, 2003;Daniel et al, 2004;Allouche & Laroche, 2005;Margolis et al, 2007;Wang et al, 2016). Meta-analysis however concentrates on the strength but not on the direction of the relation.…”