Corporate social responsibility and corporate performance: evidence from a panel of US listed companies

Abstract

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.Key words: social responsibility, stakeholders, corporate performance.

The Relation between Sustainability Performance and Stock Market Returns: An Empirical Analysis of the Dow Jones Sustainability Index Europe

“…Lo & Shue, 2007) or whether highly sustainable companies outperform other companies in terms of financial performance (e.g. Konar & Cohen, 2001;Lopez et al, 2007;Becchetti et al, 2008;Chih et al, 2010;Lourenço et al, 2012). These studies have produced interesting, albeit contradicting results.…”

Valuation effects of corporate social responsibility

“…These firms also suffer from lower levels of institutional ownership and from fewer banks participating in their loan syndicates. Becchetti et al (2008) examine the characteristics of firms in the Domini social index. They find that firms in the index have, on average, higher total sales per employee and lower return on equity than similar firms outside the index.…”

Corporate Social Performance and Firm Performance: Comparative Study among Developed and Emerging Market Firms

“…CSP and financial performance are negatively related on the account of costly CSP investments [41]. No adequate theoretical support establishes that CSP and financial performance are directly related [42].…”

“…No adequate theoretical support establishes that CSP and financial performance are directly related [42]. A significant association between CSP and financial performance is not supported [33,41,43,44]. Several studies indicated that CSP was positively related to financial performance [45][46][47].…”

“…In [36], through a meta-analysis of 33,878 samples from the previous 52 studies, the significant and positive relationship between CSP and CFP was confirmed.For four decades, research on the role and responsibilities of business focused on the business case for CSR [37]. CSP is the outcome of implementing CSR activities, which was related to the firm's relationships with stakeholders [38,39].The extant literature on CSP focused on the relationship between three key factors, namely, the level of corporate sustainability performance, corporate financial performance and the level/quality of corporate sustainability disclosure [40].CSP and financial performance are negatively related on the account of costly CSP investments [41]. No adequate theoretical support establishes that CSP and financial performance are directly related [42].…”