Measure the Performance with the Market Value Added: Evidence from CSR Companies

Abstract

An increasing number of firms in OECD countries are obtaining certification as Socially Responsible. Literature is sensitive in testing whether there is a relation between firm performance and Social Responsibility certification. In order to overcome problems related to the multiplicity of Corporate Social Responsibility (CSR) definitions and certifications, our work implements a CSR index based on the intersection between two of the three main international indices (Domini 400 Social Index, Dow Jones Sustainability World Index and FTSE4Good Index). By using this database in a panel framework, our work shows that among Corporate Performance Measures (CPF), Market Value Added (MVA) is affected by a firm's social responsible behaviour and certification. The results support the idea that CSR firms have better long-run performance. Thanks to the reputation effect, they achieve higher sales volumes and profits and a reduction in long-run costs: these effects compensate the costs due to the certification.

Sustainable development and economic performance: Gaps and trends for future research

“…They found that there is a significant negative short-term impact of CSR adoption and business performance. The CSR-CFP Corporate Financial Performance (CFP) relationship was visited again by several authors (Škare & Golja, 2012;Pätäri, Arminen, Tuppura, & Jantunen, 2014;Vergini, Jacomossi, Turra, & Hein, 2015;Rodriguez-Fernandez, 2016;Carini, Comincioli, Poddi, & Vergalli, 2017;Choongo, 2017;Oh, Hong, & Hwang, 2017;Ang & Weber, 2018;Beck, Frost, & Jones, 2018;Hategan, Sirghi, Curea-Pitorac, & Hategan, 2018;Cherian et al, 2019;Lin, Hung, et al, 2019;Lin, Law, et al, 2019), some of which considered environmental leadership (DiSegni, Huly, & Akron, 2015), its impact on innovation, and firm performance as possible moderating variables (Martinez-Conesa, Soto-Acosta, & Palacios-Manzano, 2017). Ekatah, Samy, Bampton, and Halabi (2011) sought to explore whether CSR is linked to profitability employing simple statistic methods and linear regression.…”

“…The most commonly employed market valuation variables for financial performance were 5-year cumulative share increase (DiSegni et al, 2015), capital asset pricing model (Carini et al, 2017), and value in trading day compared to value on previous trading day (Ang & Weber, 2018).…”

Who Values Corporate Social Responsibility in the Korean Stock Market?

“…Many empirical studies on the relationship between CSR and firm value report inconsistent results. Some studies report a positive relationship between CSR performance and firm value [2][3][4][5][6][7][8][9], while others find a negative [10][11][12][13] or irrelevant relationship [14][15][16].…”

CSR Performance, Financial Reporting, and Investors’ Perception on Financial Reporting

“…However, there are still contradicting ideas on the signs of the relationship between CSR and financial performance. The documented sign of the relationship may indicate negative [3], neutral [4], or positive [5][6][7][8] linkages. Accounting and finance researchers have also documented important findings on the benefits of CSR, such as reduced business risk, information asymmetry, cost of capital, insider trading profit and analyst forecast errors and increased customer trust and loyalty, employee retention, productivity, and company reputation.…”