Journal of Business Ethics 116 (1):1-20 (2013)
AbstractThis 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
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References found in this work
Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility.Michael L. Barnett - 2005 - Proceedings of the International Association for Business and Society 16:287-292.
The Worth of Values – a Literature Review on the Relation Between Corporate Social and Financial Performance.Pieter van Beurden & Tobias Gössling - 2008 - Journal of Business Ethics 82 (2):407-424.
Do Corporations Invest Enough in Environmental Responsibility?Yongtae Kim & Meir Statman - 2012 - Journal of Business Ethics 105 (1):115-129.
An Investigation of Real Versus Perceived CSP in S&P-500 Firms.Catherine Liston-Heyes & Gwen Ceton - 2009 - Journal of Business Ethics 89 (2):283-296.
The Worth of Values: A Literature Review on the Relation Between Corporate Social and Financial Performance.Pieter van Beurden & Tobias Gössling - 2008 - Journal of Business Ethics 82 (2):407 - 424.
Citations of this work
Financial Performance of Socially Responsible Investing : What Have We Learned? A Meta‐Analysis.Christophe Revelli & Jean-Laurent Viviani - 2015 - Business Ethics: A European Review 24 (2):158-185.
Social Performance and Firm Risk: Impact of the Financial Crisis.Kais Bouslah, Lawrence Kryzanowski & Bouchra M’Zali - 2018 - Journal of Business Ethics 149 (3):643-669.
Corporate Social Responsibility and Firm Value: Disaggregating the Effects on Cash Flow, Risk and Growth.Alan Gregory, Rajesh Tharyan & Julie Whittaker - 2014 - Journal of Business Ethics 124 (4):1-25.
Factors Leadind Corporations to Continue.Marius Gavrila & Radu-Marius Gavrila - 2019 - Dissertation, Walden University
Assessing UNGC Pharmaceutical Signatories Stakeholders Using Big Data.Ivana Zilic, Helen LaVan & Lori S. Cook - 2019 - Business and Society Review 124 (2):201-217.
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