Drawing on risk mitigation theory, this article examines whether the improvement of firms’ social performance reduces debt financing costs (CDFs) in China, the world’s largest emerging market. Employing both the ordinary least square (OLS) and the two-stage instrumental variable regression methods, we find that improved corporate social responsibility (CSR) reduces the CDF when firms’ CSR investment is lower than an optimal level; however, this relationship is reversed after the CSR investment exceeds the optimal level. Firms with extremely low or extremely (...) high CSR are subject to a higher CDF. The results also suggest that the optimal CSR level for small firms is higher than that for large firms. This study is the first to document a U-shaped relationship between CSR and CDF and also the first to investigate this relationship within an emerging market context. (shrink)

This study formulates a two-factor empirical model under the intertemporal CAPM framework to evaluate the cross-sectional implications of socially responsible investments in the US equity market. Our results show that socially responsible investments have no asset pricing impact on the US market. We argue that this ‘no financial impact’ finding indicates that investors will not be disadvantaged financially by investing in socially responsible funds or corporations.

The corporate financial performance (CFP)–corporate social performance (CSP) relationship has been investigated many times over the past few decades, yet the notion of CSP has generally been understood to be a single, monolithic aspect of corporate strategy. This article examines the common CFP–CSP understanding in three distinct ways: (1) by extending the evaluation of CSP as a complex, multistakeholder notion; (2) by analyzing CSP's relationship with the firm's financial performance at a given point in time as a lead (independent) variable (...) in the relationship and as a lag (dependent) variable in the relationship; and (3) for both positive and negative stakeholder relationships. The results indicate that the employee emerges as the stakeholder group most strongly linked to CFP, followed by the consumer stakeholder. The natural environment and the community stakeholder group are minimally associated with CFP. General support is found for a CFP–CSP relationship at a given point in time, with some support found for CSP as a lead (independent) variable. When used as a measure of financial performance, return on assets is more often correlated with CSP than is return on equity. These results and their implications are discussed. (shrink)

Our study examines how a company’s engagement in corporate social responsibility influences word of mouth about the company on Twitter, particularly during a service delay. We use the airline industry as the study context. On the popular social medium Twitter, people post tweets about airline services and raise concerns about service delays when flights are delayed, canceled, or diverted. Drawing on the literature on legitimacy and the halo effect, we argue that a company’s CSR engagement enhances its corporate image, which (...) in turn, influences WOM about the company on Twitter. We predict and find that airlines with better CSR engagement receive more positive word of mouth and less negative word of mouth on Twitter. We also find that service delays reduce PWOM and increase NWOM, with the additional finding that the positive relationship between service delays and NWOM is less strong for airlines with better CSR engagement. We conduct additional analyses to investigate the effects of environmental, social, and governance CSR on PWOM and NWOM. Our study has practical implications in informing companies about the benefits of CSR engagement in relation to public opinion during service delays. (shrink)

We study the relationship between corporate social performance and financial performance by comparing the portfolio returns of firms with changes in corporate social responsibility (CSR) intensity. Using an extensive US sample from the MSCI ESG database, we find that improvement in the overall CSR is generally value enhancing. The relationship varies with CSR dimensions. More importantly, the relationship shifts differently for various CSR dimensions during the crisis period when trust in the society is low and financial resource is limited. Improvement (...) in environment, human rights, and product characteristics shows higher financial returns during the financial crisis period, whereas the value enhancement of improvement in employee relations is more pronounced during the non-crisis period. (shrink)

In the literature, CSR’s roles on firm performance are found to be positive, negative, or neutral. This inconclusive pattern suggests there may be a more complicated mechanism at work than the traditional focus on simple linear associations. We propose and test an inverted-U-shaped relationship between CSR and shareholder value, the fundamental measure of firm performance. Further, we incorporate a critical firm attribute, marketing capability, to moderate the nonlinear link between CSR and shareholder value, thereby exploring a previous understudied area involving (...) the interplay between CSR and market-side competency. The results show that an initial increase in CSR engagement positively drives firm shareholder value, but the effect turns negative when a firm pursues excessive CSR engagement. Notably, however, this negative association does not apply to firms that have a high marketing capability. Our research generates meaningful implications for a stakeholder view of CSR, strategic management, firm valuation, resource-based theories, and business practices. (shrink)

Prior research suggests that participating in corporate social responsibility (CSR) activities can lead to higher future productivity. However, the empirical evidence is still scarce. The purpose of this study is to examine the relationship between CSR and future firm productivity in the U.S. chemical industry. Specifically, this study examines the relationship between CSR in year t and firm productivity in year (t + 1), (t + 2), and (t + 3). We use Data Envelopment Analysis, a non-parametric method, to measure (...) firm productivity. Results from the regression analysis support a significantly positive relationship between CSR and future firm productivity, suggesting that CSR can lead to higher productivity in the chemical industry. The findings add to the validity of the proposition in prior research. (shrink)

Assumed benefits from improved reputation are often used as motives to drive corporate social responsibility (CSR) initiatives. Are improved cost efficiencies among these reputation benefits? Cost efficiencies and cost management have become more relevant as revenue streams dry up in these tough economic times. Can a good reputation aid these efforts to develop cost efficiencies specifically when managing labor costs? Prior research hypothesizes that good reputation can create labor productivity and efficiency benefits. The purpose of this study is to empirically (...) investigate reputation's relationship with labor efficiency, labor productivity, and labor cost. Using a sample of highly reputable firms from Fortune's America's Most Admired Companies list and a corresponding matched sample of firms, we find that reputation is associated with improved labor efficiency and labor productivity. However, we do not find a significant association between reputation and reduced labor costs. Our study contributes to current research hypothesizing and finding efficiency benefits associated with good reputation. Documenting these potential reputation benefits has important implications for CSR activities and initiatives. It supports recent work that incorporates reputation into a more developed model of the relationship between CSR and performance (Vilanova et al.: 2009, Journal of Business Ethics 87, 57-69). This work is useful to businesses and supports strategies focused on "doing well by doing good" and maintaining healthy reputations. (shrink)

This study attempts to examine the relationship between environment, social, and governance management and financial performance and the role of socially responsible investment in the National Pension Fund, Korea’s largest institutional investor. This study tries to provide evidence for the slack resource hypothesis by verifying whether companies with higher financial performance make more efforts to improve ESG performance. In addition, we tried to validate whether NPF is expanding its investments in corporations with high economic performance and high ESG performance. Based (...) on our analysis, Korean companies with good financial performance actively participate in ESG. When we compared the performance between 2019 and 2020, companies with high ESG performance increased regardless of financial performance level, whereas companies with high financial performance and low ESG performance decreased. This represents that the perception and attitude of Korean companies toward ESG management are evolving. NPF has a high investment ratio for firms having a high ratio in both financial and ESG performance. NPF further invested in companies with high ESG performance, even if the financial performance is not decent. This study provides evidence that Korean companies’ interest in ESG management as well as the behavior of socially responsible investment of NPF are rising. (shrink)

This research investigates the potential for a “fair” co-branding operation. A major corporate brand is fictitiously allied with a Fair Trade labelling organization brand. The sample for the study is composed of 540 respondents, representative of the French population. By considering commercial brands and Fair Trade labels as dissimilar in terms of customers’ perceived Fair Trade orientations, this article studies how this lack of similarity impacts perceived congruence between both entities and how prior brand attitudes and congruence influence customers’ evaluation (...) of the co-branded product. The results of this research demonstrate that: Consumer prior brand attitudes toward the partner brands influence very little customers’ evaluation. Perceived similarity of the partner brands has a strong influence toward congruence of the co-branding operation. Results also indicate that congruence has a strong influence upon customers’ evaluation. An inverted U-shaped relationship exists between perceived similarity and relevancy of the alliance, and between expectancy and customers’ evaluation. The results obtained through the test of a partial least square model, and inverted U-shaped hypothesis, represent a new insight into co-branding theory. The high discursive power of fair co-branding is a key issue: the corporate brand provides the alliance with its leading position, while the Fair Trade brand provides the ethical attribute. (shrink)

In this paper, we draw on insights from theories in the management and corporate governance literature to develop a theoretical model that makes explicit the links between a firm’s corporate social responsibility related board attributes, its board CSR strategy, and its environmental and social performance. We then test the model using structural equation modeling approach. We find that the greater the CSR orientation of the board, the more proactive and comprehensive the firm’s CSR strategy, and the higher its environmental and (...) social performance. Moreover, we find this link to be endogenous and self-reinforcing, with superior CSR performers tending to further strengthen their board CSR orientation. This result while positive is also suggestive of the widening of the gap between the leads and laggards in CSR. Therefore, the question arises as to how ‘leaders’ are using their superior CSR competencies seen by many scholars as a source of corporate competitive advantage. Stakeholders of corporations therefore need to be cognizant of this aspect of CSR when evaluating a firm’s CSR activities. Policy makers also need to be cognizant of these concerns when designing regulation in this field. (shrink)

We predict multistakeholder benefits as a measure of organizational performance from the perspective of important organizational stakeholders. Specifically, we identify the relative importance of theoretical antecedents that affect the different dimensions of stakeholder benefits. Offering the first empirical synthesis of multistakeholder benefits to date, we assess the statistical explanatory power of different theories in the literature, focusing on the extent to which their suggested antecedents of organizational performance may lead to improvements in multiple dimensions of stakeholder benefits. Based on 110 (...) empirical studies since 1990 to date concerning any two of four stakeholder groups (investors, customers, employees, and community /environment), we find no evidence for any single theory to have sufficient explanatory power in predicting benefits concerning all four stakeholder groups. Thus, we cannot reduce different mechanisms leading to multistakeholder benefits to a grand model or theory but need to resort to a multi-theoretical synthesis. Taking stock of the meta-analysis, we suggest future studies should fill three gaps: multiple dimensions within a stakeholder benefit, causal complexity, and inequality of stakeholder benefit creation. (shrink)

Empirical studies, which analyze the performance of socially responsible investment (SRI) funds relative to conventional funds, find contradictory results. The aim of this paper is to investigate, with the help of a meta-analysis, how selected primary study characteristics influence the probability of a significant under- or outperformance of SRI funds compared with conventional funds. 25 studies with more than 500 observations are included in the meta-analysis. The results of this paper suggest that the consideration of the survivorship bias in a (...) study increases (decreases) the probability of a significant outperformance (underperformance) of SRI funds relative to conventional funds. The focus on United States (US) SRI funds increases (decreases) the probability of a significant outperformance (underperformance) too. The time period influences the probability of a significant under- and outperformance of SRI funds as well, but based on the results of this paper, it is not possible to draw general conclusions on this variable. (shrink)

The nature of the relationship between environmental performance and firm performance of corporations is a long standing and contentious issue in the literature. This study is intended to advance this debate by arguing for the existence of curvilinear relationship and empirically testing the same using survey data on UK manufacturing firms. FP is captured in terms of growth in sales and market share. Our results show evidence for a quadratic relationship—as firms improve their EP, they seem to achieve much higher (...) levels of FP. These results are consistent with the resource-based view of a firm; as firms engage in EP activities, they are able to gain inimitable knowledge that helps in further learning to further improve performance. Based on our results, we suggest that new studies focus on strategies to extend the period of increasing returns and maximizing the benefits of the positive association between EP and FP. (shrink)

Research focusing on the relationship between measures of Corporate Social Responsibility and company financial performance has led to mixed results in the North American context. In addition, the ethical attitudes and approaches toward CSR investments of both companies and rating agencies are not necessarily the same in Europe and the United States. In this study, we use CSR ratings issued by a major European CSR ratings agency to examine in a bi-directional manner the relationships between CSR ratings and financial performance (...) in the European context. By bi-directional, we mean an examination of the relationship between prior CSR ratings and subsequent accounting and financial performance and reciprocally, the impact of accounting and financial performance of year N − 1 on CSR ratings of year N. Our principal findings are: the greater the market capitalization of a company, the higher the Vigeo rating, the higher the risk of the company, the lower the Vigeo rating, and the greater the stock market return of a company, the lower the Vigeo rating. Based on these findings, we propose a concept of “political visibility” pursuant to which enterprises of a greater size are exposed to greater pressure to conform to norms of socially acceptable behavior, a concept of “priorities” in which enterprises that have resolved their most urgent financial needs have a greater ability to invest in CSR, a concept of “rating downgrading” which reveals the sanctioning role of the rating agency from an ethical standpoint. (shrink)

Using an international setting consisting of 5410 corporations domiciled in 24 countries, we test the insurance-like effect of corporate social responsibility (CSR) performance in the era of the pandemic and confirm that CSR performance increases socially responsible companies’ resilience against the adverse effects of the crisis. Comparing stakeholders' responses to CSR activities during the pandemic and normal periods, we observe that the link between CSR performance and firm value is stronger during the crisis period. We also realize that the social (...) aspect of CSR performance is the main driver for the mentioned effects. Finally, comparing the resilience of highly committed socially responsible companies with those with moderate and very low CSR ratings, we observe that best-in-class companies enjoy the greatest buffering effects, implying that the insurance-like effect of CSR performance is non-linear against systematic crises. Findings are robust to ceremonial CSR activities, extreme values of market-based instruments, endogeneity concern, etc. (shrink)

The business case for social responsibility is one of the most widely studied topics in the business and society literature that focuses on large firms. This attention is understandable because large firms have an obligation to shareholders who, as commonly assumed, seek to maximize returns on their investments, in turn, pressing corporate managers to show that firms’ expenditures in social engagement would pay off. Small firms, on the other hand, rarely face such pressures, yet the BCSR logic is increasingly applied (...) to small firms as well. Our primary objective in this paper is to examine whether and how much do small firm owners’ perceptions of BCSR affect the firm’s social engagement. In finding a fine-grained answer to those questions, we consider BCSR as a two-dimensional construct consisting of tangible and intangible benefits, and also integrate the BCSR perspective with the slack resource perspective to offer a motivation-capacity lens to examine firm’s social engagement. Drawing on a multi-industry sample of 478 small firms in the US, we find that while small firm owners’ perceptions about potential tangible benefits of social engagement are not related to the firm’s social engagement, perceptions about potential intangible are positively related. Firm's financial performance is also positively related to its social engagement, but there is no interaction between potential benefits and financial performance. This study contributes to an improved understanding about small firms’ social engagement, which still remains an understudied area. Our results are in line with studies which argue that firms’ social engagement is a response to institutional factors. (shrink)

The extant literature has examined the effects of ownership structures on corporate social responsibility, yet it has overlooked the non-linear and interactive effects among major shareholder groups. In this study, we examine the non-linear effects of insider and institutional ownerships on CSR. We also examine whether it is necessary to have both incentive alignment and monitoring mechanisms or it is sufficient to have either mechanism to promote CSR. Using a sample of the U.S. Fortune 1000 firms, our results suggest that (...) insider and institutional ownerships have non-linear effects on CSR. We also find support for the complementary mechanisms view, in that the highest CSR rating is observed when both ownership levels are high. Therefore, firms need to maintain strong governance structures to realize synergistic effects in promoting CSR. Our findings provide a more in-depth understanding of the relationships between ownership structures and corporate social outcomes. (shrink)

Corporate social responsibility research has burgeoned in the past several decades. Despite significant advances, our review of the literature reveals a problematic gap: We know little about how culture, practices, and interactions shape CSR. On further investigation, we discover that limited research utilizes ethnography to understand CSR, which may provide some explanation for this gap. Thus, the purpose of this article is to illustrate the utility of ethnography for advancing business and society research via a multistage framework that demonstrates how (...) three different types of ethnography may be applied to the exploration of CSR. We specifically focus on the alignment between stages in the research process, or methodological fit, as a key criterion of high-quality research. In doing so, we provide researchers embracing different worldviews a tool they may utilize to conduct and evaluate ethnographies in business and society research. (shrink)

The paper demonstrates its ‘CSR at a tipping point’ thesis by juxtaposing views of corporate social responsibility (CSR) as essential for business and societal sustainability against those that see CSR as unaffordable or irrelevant in the current economic climate. Drawing from Kohlberg's seminal theory of moral development, CSR is conceptualised as the development of organisation moral reasoning, and the proposition is illustrated by demonstrating inter-disciplinary similarities in levels of ethical concern within different approaches to the practice of marketing, human resource (...) management (HRM) and performance management. Levels of concern for CSR are related to environmental and firm-specific drivers and constraints that influence the CSR dynamic. Environmental influences on organisational CSR stances emanate from a range of stakeholder constituencies, while the importance accorded to CSR is also influenced by firm-specific factors such as the organisation's stage of development, strategy and leadership. The paper's identification of inter-disciplinary similarities in the varying levels of concern for CSR and its delineation of CSR drivers and constraints contribute to CSR theory, and these frameworks also represent analytical tools that managers can use to assess or to change an organisation's CSR stance. The multi-level perspective on CSR adopted by the paper links an organisation's overall or ‘macro’ CSR stance to the ‘meso’ levels of CSR represented by practice within its specialist functions. It proposes that the ‘CSR at a tipping point’ proposition is assessed by utilising the conceptual model in the paper within a case-study research design to determine whether specific organisations – identified as ‘CSR-positive’ ones by their relatively high level of concern for stakeholder welfare – are changing the importance they accord to CSR as a result of the new business context, and the extent to which practice in their marketing, HRM and performance management functions are shapers or consequences of this. (shrink)

Multinational enterprises are often accused of taking advantage of lax environmental regulations in developing countries. However, no quantitative analysis of the impact of doing business in nations of different income levels on environmental corporate social responsibility has been done prior to this study. Incorporating institutional factors in our approach, we argue that endoisomorphic and exoisomorphic pressures relating to ECSR impact MNEs differently according to the MNEs' level of activity in low-, lower-middle-, upper-middle-, and high-income nations. We predict and, using data (...) from 113 companies, find that selling in poorer nations is positively associated with increased levels of ECSR. Our research suggests that MNEs may not be participating in a “race to the bottom” but may instead be responding to global institutional pressure by exceeding local norms for environmental stewardship. Alternative interpretations of our findings are discussed. (shrink)

This study focuses on examining the thematic landscape of the history of scholarly publication in business ethics. We analyze the titles, abstracts, full texts, and citation information of all research papers published in the field’s leading journal, the Journal of Business Ethics, from its inaugural issue in February 1982 until December 2016—a dataset that comprises 6308 articles and 42 million words. Our key method is a computational algorithm known as probabilistic topic modeling, which we use to examine objectively the field’s (...) latent thematic landscape based on the vast volume of scholarly texts. This “big-data” approach allows us not only to provide time-specific snapshots of various research topics, but also to track the dynamic evolution of each topic over time. We further examine the pattern of individual papers’ topic diversity and the influence of individual papers’ topic diversity on their impact over time. We conclude this study with our recommendation for future studies in business ethics research. (shrink)

This study empirically examines whether firms’ environmental capital expenditures impact institutional investors’ investment decisions in the Chinese market. We particularly examine the impact of ownership type on the relationship of environmental capital expenditures and the behavior of different types of institutional investors by classifying institutional investors into two categories, short-term and long-term investors. In addition, this study further investigates whether environmental capital expenditures related to ownership type increase firm value. We find that long-term institutional investors tend to invest in state-owned (...) firms making environmental capital expenditures. Results also indicate that, with governmental backing and encouragement, the market value of SOEs making more environmental capital expenditures is likely to increase. However, no similar results are found for non-SOEs. (shrink)

The existing literature provides conflicting results on the association between firm performance and corporate social responsibility (CSR) disclosure. This paper empirically examines the effect of firm performance on CSR disclosure in terms of disclosure frequency and quality among Chinese listed firms and the possible mediating effect of corporate ownership on the relationship between firm performance and CSR disclosure. Our findings show that better‐performing firms are more likely than worse‐performing ones to disclose CSR information and to produce higher quality CSR reports. (...) In addition, the link between firm performance and CSR disclosure is found to be weaker among state‐owned enterprises compared with non‐state‐owned ones. (shrink)

In this paper, the process for firms to decide whether or not to invest in corporate social responsibility is treated from a real option perspective. We extend the Husted framework with an important extra parameter that allows us to understand the timing of CSR investment and explain why some companies drag their feet over CSR investments. Our model explicitly allows for the impact of the opportunity cost of delaying the CSR investment decision, providing firms with tools to determine the optimal (...) moment of exercising the CSR investment option. We illustrate our timing model through a case study and analyze governmental support strategies for CSR from a real options perspective. (shrink)

Using U.S. Department of Justice data on state-level political corruption, we find that, consistent with the Harmful Corruption Environment Hypothesis (HCEH), firms situated in states with higher levels of corruption incur higher costs of equity (CoEs). These results are robust for additional controls, propensity score matching, use of instrumental variables, exogenous shocks, and alternate measures for main dependent and primary independent research variables. Our study extends the stream of literature that investigates the influence of local ethical or trust factors on (...) CoE and complements works by El Ghoul and colleagues and Gupta and colleagues. (shrink)

In this study, we examine the determinants of corporate environmental responsibility, as well as the relationship between legal systems and CER as measured by a unique set of global environmental cost data. Results of our analyses show that firms’ legal origins affect CER, which requires a long-term management perspective. Specifically, our results indicate that civil law firms exhibit significantly higher levels of CER than common law firms. In addition, results of an auxiliary test suggest that manager shareholding has a significant, (...) nonlinear relationship with CER. The association between a firm’s legal origin and its CER performance remains robust after controlling for the effects of managerial ownership and issues related to endogeneity. Our findings imply that although the majority of corporate law studies in the past few decades provide support for the common law system emphasizing the maximization of shareholder value and investor protection, the civil law system stressing the maximization of stakeholder wealth and the importance of CER may become more influential in the coming decades as CER becomes central to firms’ operations. (shrink)

In this article, we examine the empirical association between corporate governance (CG) and corporate social responsibility (CSR) engagement by investigating their causal effects. Employing a large and extensive US sample, we first find that while the lag of CSR does not affect CG variables, the lag of CG variables positively affects firms’ CSR engagement, after controlling for various firm characteristics. In addition, to examine the relative importance of stakeholder theory and agency theory regarding the associations among CSR, CG, and corporate (...) financial performance (CFP), we also examine the relation between CSR and CFP. After correcting for endogeneity bias, our results show that CSR engagement positively influences CFP, supporting the conflict-resolution hypothesis based on stakeholder theory, but not the CSR overinvestment argument based on agency theory. Furthermore, firms’ CSR engagement with the community, environment, diversity, and employees plays a significantly positive role in enhancing CFP. (shrink)

In this paper, we examine the relation between corporate social responsibility (CSR) and firm risk in controversial industry sectors. We develop and test two competing hypotheses of risk reduction and window dressing. Employing an extensive U.S. sample during the 1991-2010 period from controversial industry firms, such as alcohol, tobacco, gambling, and others, we find that CSR engagement inversely affects firm risk after controlling for various firm characteristics. To deal with endogeneity issue, we adopt a system equation approach and difference regressions (...) and continue to find that CSR engagement of firms in controversial industry sectors negatively affects firm risk. To examine the premise that firm risk is more of an issue for controversial firms, we further examine the difference between non-controversial and controversial firm samples, and find that the effect of risk reduction through CSR engagement is more economically and statistically significant in controversial industry firms than in non-controversial industry firms. These findings support the risk-reduction hypothesis, but not the window-dressing hypothesis, and the notion that the top management of U.S. firms in controversial industries is, in general, risk averse and that their CSR engagement helps their risk management efforts. (shrink)

In this study, we examine whether corporate environmental responsibility plays a role in enhancing operating performance in the financial services sector. Because achieving success with CER investing is often a long-term process, we maintain that by effectively investing in CER, executives can decrease their firms’ environmental costs, thereby enhancing operating performance. By employing a unique environmental dataset covering 29 countries, we find that the reducing of environmental costs takes at least 1 or 2 years before enhancing return on assets. We (...) also find that reducing environmental costs has a more immediate and substantial effect on the performance of financial services firms in well-developed financial markets than in less-developed financial markets. These results are economically and statistically significant and robust even after alleviating endogeneity and using an additional performance measure. We interpret our empirical results as supporting the social impact and reputation-building hypothesis. Our findings also suggest that policy makers dealing with corporate sustainability management should pursue an environment-centered industry policy not only at the manufacturing sector but also at the financial services sector, as firms in both sectors with lower environmental costs perform better. (shrink)

This study is an extension of our recent ethics research in direct marketing and information technology. In this study, we investigated the relationships among core organizational values, organizational ethics, corporate social responsibility, and organizational performance outcome. Our analysis of online survey responses from a sample of IT professionals in the United States indicated that managers from organizations with organic core values reported a higher level of social responsibility relative to managers in organizations with mechanistic values; that managers in both mechanistic (...) and organic organizations which were perceived as more socially responsible were also perceived as more ethical; and that perceived ethical attitudes and social responsibility were significantly associated with organizational performance outcome measures. Our article discusses research premises, conceptual framework, hypotheses, research methodology, data analysis, recommendations for further research, and conclusions. (shrink)

In this paper, we review the literature on moderators and mediators in the corporate sustainability –corporate financial performance relationship. We provide some clarity on what has been learned so far by taking a contingency perspective on this much-researched relationship. Overall, we find that this research has made some progress in the past. However, we also find this research stream to be characterized by three major shortcomings, namely low degree of novelty, missing investment in theory building, and a lack of research (...) design and measurement options. To address these shortcomings, we suggest avenues for future research. Beyond that we also argue for a stronger emphasis on the strategic perspective of CS. In particular, we propose future research to take a step back and aim for an integration of the CS–CFP relationship into the strategic management literature. (shrink)

This paper argues the case that tests of how investors value corporate social performance (CSP) based upon realised stock market returns are liable to be weak tests if markets are efficient and firms change CSP policies infrequently. We provide a theoretical explanation of why this will be the case using examples to illustrate. Subsequently, we set out an alternative theoretical framework for the purposes of investigating whether markets place a positive, or a negative, valuation on CSP, and show why this (...) is superior to tests based upon Tobin’s Q. Using US KLD data, we demonstrate that, as theorised, markets place a positive value on CSP that is not detected by conventional returns-based tests. Our conclusion is that researchers who are interested in the question of whether engagement with a corporate social responsibility agenda is a value-enhancing activity for a company (as argued by some stakeholder theorists) or value destructive (as argued by Friedman, The social responsibility of business is to increase its profits, The New York Times Magazine, 1970), need to look beyond returns-based tests to answer the research question posed. (shrink)

This paper investigates the effect of corporate social responsibility (CSR) on firm value and seeks to identify the source of that value, by disaggregating the effects on forecasted profitability, long-term growth and the cost of capital. The study explores the possible risk (reducing) effects of CSR and their implications for financial measures of performance. For individual dimensions of CSR, in general strengths are positively valued and concerns are negatively valued, although the effect is not universal across all dimensions of CSR. (...) We show that these valuation effects are principally driven by CSR performance associated with better long run growth prospects, with an additional minor contribution made by a lower cost of equity capital. (shrink)

The espousal of organizational values with an expectation of primarily positive consequences in leadership, employee performance and organizational change has often been recognized as overly simplistic, but giving a more complete and critical account of the interrelations between values and behaviour has proven challenging. This article describes a balanced and integrated positive, ambivalent and negative approach. The use of this PAN approach is described in the case of a health care organization. Evidence is given from a survey of 96 staff (...) perceptions of their current organizational values, staff evaluations of their colleagues’ demonstration of the organization’s espoused values and content analysis of 35 ‘memorable moments’ regarding what staff had experienced. Using the PAN framework in this case suggests a picture of staff reporting experiences as 50–30–20, respectively, for the PAN approach. The implications of this framework for leadership, employee performance and organizational change are discussed. (shrink)

This study utilizes hierarchical regression analysis to explore how environmental management systems influence financial performance through customer satisfaction and customer loyalty, and the moderating effects of switching cost. The originality of the present research is to unpack the “black box” through which a firm can profit from EMSs. The empirical results indicate that EMSs have positive and significant impacts on customer satisfaction, customer loyalty, and financial performance. In addition, switching cost negatively and significantly moderates the relationship between EMSs and customer (...) satisfaction, but does not significantly moderates the relationship between EMSs and customer loyalty. The results also demonstrate that customer satisfaction and customer loyalty partially mediate the relationship between EMSs and financial performance. Our findings highlight that customer satisfaction, customer loyalty, and switching cost play important roles for a firm to profit from EMSs. (shrink)

China has long enjoyed its position as the world's cheapest production country. However, this position is being shaken due to the increasingly rising costs in China in pace with China's rapid economic development. China's New Labour Contract Law which took effect from 1 January 2008 has further pushed the labour costs in China in general. The purpose of this article is to arrive at an in-depth understanding of why foreign firms conduct sourcing in China where sourcing is becoming increasingly expensive. (...) The experiences of four Swedish companies in the textile and clothing industry (TCI) conducting sourcing in China are presented. Our findings show that sourcing in China is becoming both cost-and strategy-driven. Companies purely chasing the cheapest production would most probably consider leaving China, whereas companies with a long-term strategic intent and a high level of business ethics and corporate social responsibility (CSR) practices will retain all or most of their sourcing activities on the Chinese soil despite the rising costs. (shrink)

This paper examines whether a firm’s financial performance is associated with superior environmental, social and governance scores in emerging markets of multinationals in Latin America. The study addresses the current research gap on this issue; it develops hypotheses and tests them by applying linear regressions with a data panel drawn from the Thomson Reuters Eikon™ database to analyse data on 104 multinationals from Brazil, Chile, Colombia, Mexico and Peru between 2011 and 2015. The results suggest that the relationship between the (...) ESG score and FP is significantly statistically negative. Furthermore, in examining environmental, social and governance separately to accurately determine each variable’s relationship to multilatinas’ FP, the results reveal a negative relationship. Finally, the empirical analysis provides evidence for a moderating effect of financial slack and geographic international diversification on the relationship between ESG dimensions and firms’ FP. This study furthers understanding of the relationship between ESG dimensions and FP for the Latin American business context. (shrink)

Based on the literature on stakeholder management and family firm dynamics, this research analyses the relationship between three constructs: the identification of business families with their family firms, FFs’ orientation toward key non-family stakeholders, and the achievement of better economic performance. Data analyses from 374 family and non-family members of 173 Spanish FFs show that a high level of family identification with their firms affects the orientation of FFs toward key non-family stakeholders in setting corporate goals and that this orientation (...) will lead to higher economic performance only when it is built on family identification with the firm. Our results also show that the significance of both relationships changes with the degree of family involvement in the management of the FF. (shrink)

This research investigates various firm motives for practicing corporate social responsibility (CSR). More precisely, it examines whether a firm's primary motive for undertaking CSR is related to the type of actions performed. Such exploratory research is overdue following more than 40 years of scholarly contention on the financial rewards of doing (and looking) good. By uncovering and measuring specific aspects of CSR, I offer an initial understanding of interactions within firm CSR operations. Theory on types of CSR have surfaced, yet (...) empirical studies are few. In this research, I address this disparity by using original quantitative measures of both motive and type. The outcomes of this investigation challenge certain extant notions of CSR, while introducing a measure of objectivity in some long‐standing debates among scholars and corporate stakeholders. (shrink)

Many scholars have investigated the direct impact of entrepreneurial orientation on performance, but this direct association seems both spurious and ambiguous because many parameters may have an indirect influence on this relationship. The present study thus considers sustainable practices—environmental practices, social practices in the workplace, and social practices in the community —as three probable mediators in the relationship between EO and performance, which is considered in terms of its financial and non-financial dimensions. We seek to show to what extent small- (...) and medium-sized enterprises’ sustainable practices are useful assets, which are supported by EO, to improve performance. Using a structural equation modeling approach, data collected from 406 French SMEs were tested against the model. Our findings reveal that EO has a positive impact on the implementation of sustainable practices and that SPW partially mediate the link between EO and performance. Taken together, these findings suggest that EO plays a role in indirectly promoting performance by enhancing certain human resource management practices. (shrink)

This study examines the endogenous relation between corporate social responsibility and tax avoidance by focusing on a common strategy of corporate tax avoidance, i.e., establishing entities in offshore tax havens. Using hand-collected data on a sample of U.S. firms, we find that firms’ CSR ratings increase substantially in the two years after they first open tax haven affiliates. We provide evidence by using the controlled foreign corporations look-through rule enacted by Congress in 2006 that facilitates offshore profit shifting. We find (...) that firms that are affected by the CFC legislation increase their CSR practices in response. Overall, our results are consistent with the risk management theory, which argues that firms hedge against the potential negative consequences of aggressive tax avoidance practices through an increase in positive CSR activities. (shrink)

Firm managers play an important role in the implementation of corporate social responsibility (CSR) actions. Education is emerging as the key factor in developing a sense of moral responsibility amongst the business students who will eventually become company managers and decision makers. The aim of this research is, thus, twofold. First, to analyze the existence of a direct positive correlation between university students’ perception of CSR and its impact on business performance; and second, to examine the extent to which two (...) factors (advantages brought by CSR and responsibilities toward stakeholders) act as mediation variables in the aforementioned correlation. The analysis was performed with a sample of 390 business‐related university students. Amongst the potential contributions made by this study we can highlight the possibility of knowing future managers’ way of thinking and of knowing the aspects where educational centers might improve their CSR teaching. (shrink)

Shareholders with standard monetary preferences will give a manager incentives to increase firm profits, which can be achieved with equity grants. When shareholders are socially responsible, in the sense that they also value corporate social performance, it is not clear which incentives the manager should receive. Yet, in a standard principal–agent model, we show that the optimal contract is surprisingly simple: it consists in giving equity holdings to the manager. This is notably because the stock price will incorporate expected profits (...) as well as the social performance of the firm, to the extent that it is valued by shareholders. Consequently, equity holdings give the manager incentives to jointly maximize the profits and the social performance of the firm according to shareholders’ preferences. To facilitate alignment of interests, more socially responsible firms will optimally hire more socially responsible managers. We conclude that neither the shareholder primacy model nor equity-based managerial compensation is necessarily inconsistent with the attainment of social objectives. (shrink)

In this paper, the process for firms to decide whether or not to invest in corporate social responsibility is treated from a real option perspective. We extend the Husted framework with an important extra parameter that allows us to understand the timing of CSR investment and explain why some companies drag their feet over CSR investments. Our model explicitly allows for the impact of the opportunity cost of delaying the CSR investment decision, providing firms with tools to determine the optimal (...) moment of exercising the CSR investment option. We illustrate our timing model through a case study and analyze governmental support strategies for CSR from a real options perspective. (shrink)

In this article, we examine the empirical association between firm value and CSR engagement for firms in sinful industries, such as tobacco, gambling, and alcohol, as well as industries involved with emerging environmental, social, or ethical issues, i.e., weapon, oil, cement, and biotech. We develop and test three hypotheses, the window-dressing hypothesis, the value-enhancement hypothesis, and the value-irrelevance hypothesis. Using an extesive US sample from 1995 to 2009, we find that CSR engagement of firms in controversial industries positively affects firm (...) value after controlling for various firm characteristics. To address the potential endogeneity problem, we further estimate a system of equations and change regression and continue to find a positive relation between CSR engagement and firm value. Our findings support the value-enhancement hypothesis and are consistent with the premise that the top management of US firms in controversial industries, in general, considers social responsibility important even though their products are harmful to human being, society, or environment. (shrink)

In this study, we examine the relation between corporate environmental responsibility and risk in U.S. public firms. We develop and test the risk-reduction, resource-constraint, and cross-industry variation hypotheses. Using an extensive U.S. sample during the 1991–2012 period, we find that for U.S. industries as a whole, CER engagement inversely affects firm risk after controlling for various firm characteristics. The result remains robust when we use firm fixed effect or an alternative measure of CER using principal component analysis or downside risk (...) measures. To address the concern of endogeneity bias, we use a system equations approach and dynamic system generalized methods of moment regressions, and continue to find that environmentally responsible firms experience lower risk. These findings support the risk-reduction hypothesis, but not the resource-constraint hypothesis, along with the notion that the top management in U.S. firms is generally risk averse and that their CER engagement facilitates their risk management efforts. Our cross-industry analysis further reveals that the inverse CER-risk association mainly comes from the manufacturing sector, whereas in the service sector, CER tends to increase firm risk. (shrink)

The link between corporate social responsibility (CSR) and competitiveness has been examined mainly at the business level. The purpose of this paper is to improve conceptual understanding and provide empirical evidence on the link between CSR and competitiveness at the national level. We draw on an eclectic-synthetic framework of international economics, strategic management and CSR literatures to explore conceptually whether and how CSR can impact on the competitiveness of nations, and test our hypotheses empirically with a sample of 19 developed (...) countries over a 6-year period. Our evidence suggests that CSR can make a significant positive contribution to national competitiveness, as measured by national living standards. We also find that countries with a relatively low innovation record can benefit more, as compared to highly innovative countries, by implementing nationwide CSR-based positioning strategies. (shrink)

The objective of this paper is to explore, through a qualitative study of small regional airports, how sustainability issues are taken into account in remote small- and medium-sized enterprises. Based on 42 semi-structured interviews conducted with managers of small regional Canadian airports and experts in this area, this study shows the quasi-absence of specific measures for sustainability, despite the seriousness of environmental issues, which tend to be subordinated to economic priorities and operational activities. The paper contributes to the literature on (...) sustainability in SMEs by focusing on passive organizations located in remote areas and the complex reasons underlying their lack or absence of environmental commitment. The paper sheds more light on the essential role of stakeholders in providing the resources and skills necessary for the development of sustainability initiatives in passive SMEs. The study’s managerial contributions and implications for stakeholders are also discussed. (shrink)