Firm and country characteristics related to cumulative contribution to society

Abstract

Purpose Many indicators attempt to measure the social performance of a company from different perspectives. Grounded in stakeholder theory, this paper aims to propose capitalising the economic value distributed annually to society over a period of time, hereafter called a firm’s cumulative contribution to society (CCS). This can be done by including everything that stakeholders value; for example, payments of taxes, remuneration of employees, payments to suppliers and creditors, donations, dividends, research and development expenses and efforts to improve the environment. Design/methodology/approach First, this paper makes a methodological proposal about how to calculate the CCS and discusses potentials and shortcomings. Then, a set of hypotheses are formulated about the firm characteristics and country attributes that make the most positive contribution to society such as business models, financial performance, a country’s human development, income equality and the extent of its shadow economy. The authors also argue that a company that originally contributes to society will continue to do so because of the structural inertia faced by organisations. The hypotheses were validated with an empirical study conducted with a sample of 9,276 new-born European companies. Findings The most significant contributors to society are large, profitable companies, which are leveraged but solvent, with high asset turnover and high-profit margins and which are productive and pay high wages. Unfortunately, this win-win situation describes a small percentage of the explained variance, which can explain why social and financial performance sometimes do not go hand-in-hand. The paper identifies features of other types of companies that contribute to society, suggesting criteria for socially responsible investors. Country development favours the cumulative contribution that firms make to society. Research limitations/implications Most accounting systems do not collect all the information necessary to calculate a refined version of the indicator such as percentage of purchases from local suppliers, percentage of salaries for executives and disabled employees and percentage of financing from socially responsible financial entities. The authors encourage modification of the accounting systems to include those aspects. Practical implications This paper identifies several types of companies that contribute the most to society from a modest set of financial indicators. Socially responsible investors can estimate their contribution to society, devising new investment criteria. Social implications The paper identifies several types of companies that contribute the most to society from a modest set of financial indicators. Socially responsible investors can estimate their contribution to society, devising new investment criteria. Originality/value The paper makes two contributions, one methodological and the other empirical. By applying a financial methodology, the authors propose to capitalise the contributions of a company over a period of time. The empirical study identifies both firm and country characteristics that explain CCS.

The Effect of Executive Narcissism and Characteristics of External Auditors on Foreign Ownership on Tax Avoidance as Moderating Variable (A Study on Energy Sector Companies of the Indonesian Stock Exchange)

“…It could also be drawn that executive narcissism was a determining factor in tax avoidance practices by companies. Since tax avoidance is a legal practice [14], [15], [16], [17], tax avoidance is an achievement for executives who successfully implement and successfully reduce their tax payable, which is also consistent with the assumption that narcissistic executives need recognition [18]. However, the authors did not find the effect of external auditor characteristics on the three variables of tax avoidance.…”

Balancing people, planet and profit: export strategies for sustainable value creation

“…To understand the different processes at play in linking the causal and outcome variables, it may be fruitful to replicate our analysis at a more granular level, distinguishing between different metrics of financial performance. To deliver the holistic understanding of sustainable value creation called for by Bıçakcıoğlu (2018), researchers should also consider non-financial indicators of performance such as contribution to society (Serrano-Cinca et al. , 2021), export dependence or export intensity (Bıçakcıoğlu, 2018), as well as the indirect effect of sustainable value creation in international markets on financial performance in the domestic market (Leonidou et al.…”

Sustainable investment and environmental, social, and governance investing: A bibliometric and systematic literature review

“…There is persistence from stakeholders to integrate the triple bottom line objectives and adopt superior ESG policies. The stakeholder theory, therefore, enriches the integration of ESG activities (Ashraf et al, 2022) and ensures firms' cumulative contribution to society (Serrano-Cinca et al, 2021). Further, shareholders are actively influencing firms' environmental and social practices through interventions, primarily divestment, dialog, and proposals.…”