Do Investors Value a Firm’s Commitment to Social Activities?

Waymond Rodgers (), Hiu Choy and Andrés Guiral

Journal of Business Ethics, 2013, vol. 114, issue 4, 607-623

Abstract: Previous empirical research has found mixed results for the impact of corporate social responsibility (CSR) investments on corporate financial performance (CFP). This paper contributes to the literature by exploring in a two stage investor decision-making model the relationship between a firm’s innovation effort, CSR, and financial performance. We simultaneously examine the impact of CSR on both accounting-based (financial health) and market-based (Tobin’s Q) financial performance measures. From a sample of top corporate citizens, we find that: (1) a firm’s social responsibility commitment (CSR) contributes to its financial performance; (2) after controlling for investment in innovation activities, CSR continues to have a positive impact on a firm’s financial performance; (3) the customer dimension of CSR has a positive effect on both CFP measures, whereas the employee dimension indicates a significant impact only on financial heath; and (4) the community relation dimension of CSR only affects the market-based CFP measure of firms with high innovation intensity. Copyright Springer Science+Business Media Dordrecht 2013

Keywords: Corporate social responsibility; Corporate financial performance; Innovation; Social dimensions; Investor decision making (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (30)

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DOI: 10.1007/s10551-013-1707-1

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