When doing good for society is good for shareholders: importance of alignment between strategy and CSR performance

Rajiv D. Banker (), Xinjie Ma (), Carol Pomare () and Yue Zhang ()
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Rajiv D. Banker: Temple University
Xinjie Ma: National University of Singapore
Carol Pomare: Mount Allison University
Yue Zhang: Lingnan University

Review of Accounting Studies, 2023, vol. 28, issue 2, No 19, 1074-1106

Abstract: Abstract We investigate the association between firms’ strategy and their corporate social responsibility (CSR) performance and whether the alignment between strategy and CSR activities affects firms’ financial performance. We describe firms’ strategies as innovation differentiation, marketing differentiation, and cost leadership Miller, (1986). We expect a higher benefit from CSR for firms that rely more on innovation differentiation and a lower benefit for firms that rely more on marketing differentiation and cost leadership. We measure firms’ strategy through a textual analysis of 10-K filings and collect CSR data from KLD Ratings. We find that innovation differentiation strategy is positively associated with CSR performance, while cost leadership (marketing differentiation) is negatively (insignificantly) associated with CSR performance. Moreover, we find that innovating differentiators with higher CSR performance achieve higher financial performance. Finally, we provide additional evidence that information asymmetry and financial constraints moderate the alignment between firms’ strategy and CSR performance.

Keywords: Strategy; Corporate social responsibility (CSR); Social license to operate; Textual analysis; 10-K filings; L10; M14; M4 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11142-021-09664-y

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