Talking is Silver, Doing is Gold? – The Influence of Corporate Social Responsibility on Corporate Financial Performance

Sustainability has become an omnipresent topic in the media and public as well as private debate. Stakeholders see the responsibility to promote sustainability with companies, pressuring them to increase their Corporate Social Responsibility (CSR). The relationship between CSR, being a means to satisfy a firm’s stakeholders, and Corporate Financial Performance (CFP) is extensively debated in academics. This thesis contributes to this debate and tries to overcome measuring inaccuracies of previous studies by strictly categorizing CSR activities into CSR communication and CSR commitment. A total of 656 annual and CSR reports were examined, and variables representing these CSR activities were carefully and elaborately created, resulting in, among other things, a CSR communication breadth index, as well as an accurate assessment of communication quantity. A panel data analysis on European firms across industries over the observation period of eight years was conducted. The results reveal that only CSR communication has an influence on CFP. While standalone CSR reports and communication breadth have a positive influence, high levels of communication quantity have a negative effect. Keywords: Corporate Social Responsibility; corporate financial performance; CSR commitment; CSR communication; stakeholder theorySustainability has become an omnipresent topic in the media and public as well as private debate. Stakeholders see the responsibility to promote sustainability with companies, pressuring them to increase their Corporate Social Responsibility (CSR). The relationship between CSR, being a means to satisfy a firm’s stakeholders, and Corporate Financial Performance (CFP) is extensively debated in academics. This thesis contributes to this debate and tries to overcome measuring inaccuracies of previous studies by strictly categorizing CSR activities into CSR communication and CSR commitment. A total of 656 annual and CSR reports were examined, and variables representing these CSR activities were carefully and elaborately created, resulting in, among other things, a CSR communication breadth index, as well as an accurate assessment of communication quantity. A panel data analysis on European firms across industries over the observation period of eight years was conducted. The results reveal that only CSR communication has an influence on CFP. While standalone CSR reports and communication breadth have a positive influence, high levels of communication quantity have a negative effect. Keywords: Corporate Social Responsibility; corporate financial performance; CSR commitment; CSR communication; stakeholder theor

DOES OWNERSHIP CONCENTRATION MODERATES CORPORATE SOCIAL RESPONSIBILITY-FIRM PERFORMANCE RELATIONSHIP?

CSR is basically a commitment demanded from companies to protect stakeholder interests, enhance societal conditions, and contribute to sustainable development. This study investigated the relationship between corporate social responsibility and firm financial performance with a particular focus on measuring the moderating impact of ownership concentration on the CSR-performance relationship. The data is collected from the companies’ annual reports, State Bank of Pakistan database and the Pakistan Stock Exchange for the period 2014-2020. The fixed effect regression model is used to measure the impact of CSR on firm financial performance. The results of the study revealed that CSR has a significant negative impact on firm financial performance. Furthermore, ownership concentration also negatively moderates the relationship between CSR and firm financial performance

Exploring corporate social responsibility and financial performance through stakeholder theory in the tourism industries

The literature examining the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) in the tourism industries is extensive but it has not verified the relationship unambiguously. This has been attributed to the methodological artefacts used, but also to the lack of a solid theoretical foundation. Based on stakeholder theory, this paper proposes the use of two models that explicitly investigate the relationship between stakeholder management, expressed as CSR activities, firm strategy and CFP. The strategic stakeholder model and the intrinsic stakeholder commitment model are evaluated in terms of their descriptive accuracy in four different tourism-related industries (airlines, casinos, hotels and restaurants) using panel regressions for the years 2005-2014. The results provide useful theoretical insights into the way in which CSR interacts with firm strategy and CFP, as well as managerial insights into how tourism practitioners can identify which CSR activities may impact CFP. (C) 2017 Elsevier Ltd. All rights reserved

The environmental, social, governance, and financial performance effects on companies that adopt the United Nations Global Compact

This paper aims to investigate companies’ environmental, social, governance (ESG), and financial implications of their commitment to the United Nations Global Compact (UNGC). The focus is placed on companies operating in the three countries with the highest number of UNGC participants: Spain, France, and Japan. The results clearly reveal that adoption of the UNGC often requires an organizational change that fosters stakeholder engagement, ultimately resulting in improvements in companies’ ESG performance. Additionally, the results reveal that ESG performance has a significant impact on financial performance for companies that adopted the principles of the UNGC. These findings provide both non-financial and financial incentives to companies to commit to this voluntary corporate social responsibility (CSR) initiative, which will have important implications on companies’ strategic management policies that aim to foster sustainable businesses and community development. Finally, the linkages between the UNGC-committed companies’ ESG and financial performance may be influenced by geographical spread, mainly due to the appearance of differences in the institutional, societal, and cultural settings

Sustainability disclosure and reputation: a comparative study

“This is a post-peer-review, pre-copyedit version of an article published in Corporate Reputation Review. The definitive publisher-authenticated version Corporate Reputation Review 14(2), pp.79-96 is available online at: http://www.palgrave-journals.com/crr/index.html”Drawing on legitimacy theory, we discuss that a company’s reputation is a determinant of sustainability disclosure. Specifically, we consider the concept of reputation into three dimensions for analysis: stakeholders’ commitment, financial performance and media exposure. This paper differs from previous social and environmental reporting studies in that it investigates both internal and external contextual factors that influence disclosure practice. We claim that companies with a good financial performance, that are adopting an active strategic position towards stakeholders and that are exposed to significant public pressure are more likely to use sustainability disclosure in order to communicate their legitimacy to operate to stakeholders. Moreover the paper analyses a wide range of corporate reports for their social and environmental content using an international sample that allows for a comparison of disclosure practices among Continental European, UK and USA companies. Our results show that stakeholder commitment and media exposure are positively associated with sustainability disclosure. Moreover, we find evidence that the drivers of disclosure vary by information type

Essays in Corporate Responsibility and Finance

This dissertation consists of three chapters: Chapter 1: The Effects of Corporate Social Performance and Social Norms on Market Valuation of Nonfinancial Disclosures Using a novel measure of the quality of corporate social responsibility (CSR) disclosures by global companies, this paper analyzes how CSR report quality affects firm value when mediating roles of social pressure and CSR performance are considered. I find that firms operating in socially controversial industries enjoy higher valuations when they issue high-quality CSR reports. I also find that for firms with poor CSR performance, higher-quality CSR disclosure is associated with a decline in firm value, while this negative association is mitigated for firms with superior CSR performance. These results indicate that CSR disclosure quality is priced by the market over and above CSR performance and the act of CSR disclosure. Chapter 2: Firm Value, Legal Environment, and Corporate Social Responsibility Disclosure Regulations I study valuation implications of Corporate Social Responsibility (CSR) disclosure quality in countries with strong and weak legal systems. I find that CSR disclosure quality has a negative impact on firm value when CSR reporting is regulated and the legal system in place is strong. By contrast, CSR disclosure quality has a positive impact on firm value when CSR disclosure is regulated and the legal system is weak. I interpret these results as disclosure regulations partially making up for lack of adequate legal system strength to induce credible disclosures to benefit firm value. CSR disclosure regulations do not have as much a role to play in countries with strong legal systems, which already foster disclosure credibility. Instead, CSR disclosure regulations impair the discretion firms could exercise in choosing a judicious level of disclosure quality to improve firm value. Chapter 3: Does Corporate Responsibility Affect Firm Leverage? The Roles of Environmental Risk Management and Stakeholder Relations on Capital Structure This paper investigates the impact of a firm’s corporate social and environmental activities on its capital structure decisions. I find that firms with superior environmental corporate responsibility (CR) and poor social CR activities hold significantly higher leverage. However, a strong environmental commitment completely dominates the leverage impact of CR for firms that excel in both social and environmental CR. This result is also valid for firms with high cash flow volatility and taxable income, consistent with the risk reduction benefits associated with pursuing a proactive environmental program. Furthermore, environmental commitment mostly preserves its impact on leverage even when the incentives to maintain better stakeholder (social) relations are paramount relative to good environmental reputation, such as for firms producing unique products or those with high liquidation risk, as predicted by the stakeholder theory of capital structure. These results underscore the material impact of environmental management policies, alongside social relations, on corporate financing decisions, and thus extend the stakeholder theory of capital structure beyond its initial conceptualization to cover the role of a firm’s broader CR orientation on financial leverage

In what ways Enterprise Rent-a-Car’s CSR activities jointly serve the company's strategic motives and the interests of the society?

This study provides an exploratory investigation of the link between Corporate Social Responsibility (CSR) and Firm’s Competitive Advantage concurrently contributing to our understanding of how organizations impact society and potentially benefit a variety of stakeholders (Ray, 2006). The impact that an organization’s corporate social responsibility (CSR) has on their current and potential employees, customers and the society can be crucial to organizational survival (Ibid.). This study, therefore, poses three primary research questions (1) Does CSR lead to improved financial performance or gain of any valuable and rare resources?, (2) What kind of benefits does CSR have that can lead to improved financial performance (Branco and Rodrigues, 2006)? and (3) How does the firm’s approach to stakeholder management influence its ability to protect and enhance the value of these resources? Corporate Social Reputation, the perception of the firm by its internal and external stakeholders, is argued to be a valuable and a rare resource that CSR provides. By building positive stakeholder relationships through CSR the firm is able to positively influence stakeholder assessment and gain ‘reputational capital’. The value of reputational capital lies in its ability to promote operational efficiency and beget service differentiation, which independently as well as in tandem, grant firms superior performance over their competitors (Peters, 2007: 3). Corporate social reputation is also expected to be positively influenced by the firm’s adoption of corporate community involvement. ‘This paper also briefly reviews the positive effects corporate community involvement can have on stakeholder management outcomes such as employee motivation, morale, commitment, recruitment, retention, development and teamwork’ (Zappalà, 2004: 185). ‘In this study, the link between reputation and CSR is approached through value theory. People are fascinated to organisations they think have similar values and norms as they regard important (Chatman, 1989). Based on Dowling’s (2004) suggestion, a company with good reputation has values that suit to individual’s (evaluator’s) own values’ (Siltaoja, 2006: 92). ‘The main concepts in this paper - CSR, reputation and value, have been defined’ (Siltaoja, 2006: 91). The propositions developed were evaluated via focused semi-structured interviews of the local diversity senior management team of Enterprise Rent-a-Car, East Midland branch in Nottingham, UK. Socially Anchored Competencies (SAC) Model and Stakeholder integrated model are employed to assess the goodness of the fit of the company’s core strategy with their CSR strategy and their stakeholder integration into their collaborative decision making process. ‘The results provide support for the positive influence of corporate social responsibility on corporate social reputation, but no support for a significant relation between their community networks and corporate social reputation. Also, the results indicate that corporate social reputation directly, positively and significantly contributes to a firm’s ability to achieve and sustain competitive advantage for both an internal (return on assets) and external (customer satisfaction and reputation) measure of firm’s financial performance. Further, the findings suggest that the contribution of CSR to financial performance may be indirect and facilitated through a step-wise process which requires the attainment of a positive and superior corporate social reputation before competitive advantage can be achieved’ (Peters, 2007: 4)

How do different LGBTQ-friendly policies affect firm performance : An Empirical Study of U.S. Companies from 2005 to 2019

The LGBTQ community refers to lesbian, gay, bisexual, transgender, and queer people. The controversy surrounding sexual minorities never ends. Academic research on the LGBTQ community has gone through three stages, with early research on sexual minorities being studied as a disease and subsequent research examining negative attitudes toward the LGBTQ community. Currently, scholars focus on the relationship between institutions and LGBTQ. As society becomes more liberal, acceptance of the LGBTQ community increases and more and more people support the LGBTQ community's fight for equal rights with heterosexuals. In this liberal culture, companies adopting LGBTQ-friendly policies take social responsibility. These companies that adopt LGBTQ-friendly policies try to create an equal work environment internally. Externally, companies demonstrate their pursuit of diversity and equality to their stakeholders. Based on corporate social responsibility theory and stakeholder theory, this paper examines the relationship between firms' adoption of LGBTQ-friendly policies and firm performance through empirical regressions. This study aims to examine which LGBTQ policies have the most significant impact on firm performance. And how these policies work, i.e., whether they improve firm performance by increasing productivity or by attracting outside investment. This paper uses the Corporate Equality Index for U.S. public companies from 2005 to 2019 and financial data for the empirical study. The CEI comes from the Human Rights Fund Committee, and the financial data are all from Reuters. Corporate LGBTQ friendliness is measured by CEI data in four areas: equal employment opportunity, inclusion benefits, LGBTQ diversity committee, and public commitment. Financial performance is measured by Tobin's Q, ROA, factor productivity, and employee productivity. The empirical results of the study indicate that more LGBTQ-friendly firms have higher stock market valuations and profitability but have lower factor productivity and employee productivity. This positive impact is magnified in open states, influenced by less religious and more liberal social norms, while the negative impact is magnified in more conservative states. Of the four policies that make up the CEI index, public commitment is the most influential LGBTQ-friendly policy

In what ways Enterprise Rent-a-Car’s CSR activities jointly serve the company’s strategic motives and the interests of the society?

This study provides an exploratory investigation of the link between Corporate Social Responsibility (CSR) and Firm’s Competitive Advantage concurrently contributing to our understanding of how organizations impact society and potentially benefit a variety of stakeholders (Ray, 2006). The impact that an organization’s corporate social responsibility (CSR) has on their current and potential employees, customers and the society can be crucial to organizational survival (Ibid.). This study, therefore, poses three primary research questions (1) Does CSR lead to improved financial performance or gain of any valuable and rare resources?, (2) What kind of benefits does CSR have that can lead to improved financial performance (Branco and Rodrigues, 2006)? and (3) How does the firm’s approach to stakeholder management influence its ability to protect and enhance the value of these resources? Corporate Social Reputation, the perception of the firm by its internal and external stakeholders, is argued to be a valuable and a rare resource that CSR provides. By building positive stakeholder relationships through CSR the firm is able to positively influence stakeholder assessment and gain ‘reputational capital’. The value of reputational capital lies in its ability to promote operational efficiency and beget service differentiation, which independently as well as in tandem, grant firms superior performance over their competitors (Peters, 2007: 3). Corporate social reputation is also expected to be positively influenced by the firm’s adoption of corporate community involvement. ‘This paper also briefly reviews the positive effects corporate community involvement can have on stakeholder management outcomes such as employee motivation, morale, commitment, recruitment, retention, development and teamwork’ (Zappalà, 2004: 185). ‘In this study, the link between reputation and CSR is approached through value theory. People are fascinated to organisations they think have similar values and norms as they regard important (Chatman, 1989). Based on Dowling’s (2004) suggestion, a company with good reputation has values that suit to individual’s (evaluator’s) own values’ (Siltaoja, 2006: 92). ‘The main concepts in this paper - CSR, reputation and value, have been defined’ (Siltaoja, 2006: 91). The propositions developed were evaluated via focused semi-structured interviews of the local diversity senior management team of Enterprise Rent-a-Car, East Midland branch in Nottingham, UK. Socially Anchored Competencies (SAC) Model and Stakeholder integrated model are employed to assess the goodness of the fit of the company’s core strategy with their CSR strategy and their stakeholder integration into their collaborative decision making process. ‘The results provide support for the positive influence of corporate social responsibility on corporate social reputation, but no support for a significant relation between their community networks and corporate social reputation. Also, the results indicate that corporate social reputation directly, positively and significantly contributes to a firm’s ability to achieve and sustain competitive advantage for both an internal (return on assets) and external (customer satisfaction and reputation) measure of firm’s financial performance. Further, the findings suggest that the contribution of CSR to financial performance may be indirect and facilitated through a step-wise process which requires the attainment of a positive and superior corporate social reputation before competitive advantage can be achieved’ (Peters, 2007: 4)

In what ways Enterprise Rent-a-Car’s CSR activities jointly serve the company's strategic motives and the interests of the society?

This study provides an exploratory investigation of the link between Corporate Social Responsibility (CSR) and Firm’s Competitive Advantage concurrently contributing to our understanding of how organizations impact society and potentially benefit a variety of stakeholders (Ray, 2006). The impact that an organization’s corporate social responsibility (CSR) has on their current and potential employees, customers and the society can be crucial to organizational survival (Ibid.). This study, therefore, poses three primary research questions (1) Does CSR lead to improved financial performance or gain of any valuable and rare resources?, (2) What kind of benefits does CSR have that can lead to improved financial performance (Branco and Rodrigues, 2006)? and (3) How does the firm’s approach to stakeholder management influence its ability to protect and enhance the value of these resources? Corporate Social Reputation, the perception of the firm by its internal and external stakeholders, is argued to be a valuable and a rare resource that CSR provides. By building positive stakeholder relationships through CSR the firm is able to positively influence stakeholder assessment and gain ‘reputational capital’. The value of reputational capital lies in its ability to promote operational efficiency and beget service differentiation, which independently as well as in tandem, grant firms superior performance over their competitors (Peters, 2007: 3). Corporate social reputation is also expected to be positively influenced by the firm’s adoption of corporate community involvement. ‘This paper also briefly reviews the positive effects corporate community involvement can have on stakeholder management outcomes such as employee motivation, morale, commitment, recruitment, retention, development and teamwork’ (Zappalà, 2004: 185). ‘In this study, the link between reputation and CSR is approached through value theory. People are fascinated to organisations they think have similar values and norms as they regard important (Chatman, 1989). Based on Dowling’s (2004) suggestion, a company with good reputation has values that suit to individual’s (evaluator’s) own values’ (Siltaoja, 2006: 92). ‘The main concepts in this paper - CSR, reputation and value, have been defined’ (Siltaoja, 2006: 91). The propositions developed were evaluated via focused semi-structured interviews of the local diversity senior management team of Enterprise Rent-a-Car, East Midland branch in Nottingham, UK. Socially Anchored Competencies (SAC) Model and Stakeholder integrated model are employed to assess the goodness of the fit of the company’s core strategy with their CSR strategy and their stakeholder integration into their collaborative decision making process. ‘The results provide support for the positive influence of corporate social responsibility on corporate social reputation, but no support for a significant relation between their community networks and corporate social reputation. Also, the results indicate that corporate social reputation directly, positively and significantly contributes to a firm’s ability to achieve and sustain competitive advantage for both an internal (return on assets) and external (customer satisfaction and reputation) measure of firm’s financial performance. Further, the findings suggest that the contribution of CSR to financial performance may be indirect and facilitated through a step-wise process which requires the attainment of a positive and superior corporate social reputation before competitive advantage can be achieved’ (Peters, 2007: 4)